Answer:
decreases
Explanation:
LIFO means last in first out. It means that it is the last purchased inventory that is the first to be sold.
FIFO means first in, first out. It means that it is the first purchased inventory that is the first to be sold
In a period of rising prices, changing from FIFO to LIFO means that the latest purchased goods would be of higher prices than the older goods. This would increase cost of goods sold and reduce net income.
Also, ending inventory would consist of older goods purchased at lower prices
Both net income and ending inventory would decrease
Would you rather own your own business or become a franchise
Answer:
own a business
Explanation:
I'm able to create my own brand and free to do what I want
Answer:
{: Own My Own Business :}
Explanation:
I would rather own my own business so that I could get lots of money yet give other people money ^w^ It would also be a restaurant. Most likely so I could eat da food as in.. 'taste' da food. :}
Forrester Company is considering buying new equipment that would increase monthly fixed costs from $425,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $1,140,000 and current break-even units are 11,400. If Forrester purchases this new equipment, the revised break-even point in dollars would be:
Answer:
Break-even point (dollars)= $810,000
Explanation:
Giving the following information:
Fixed costs= $445,500
Unitary variable cost= $45
Selling price= $100
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 445,500 / [(100 - 45) / 100]
Break-even point (dollars)= $810,000
On December 31, 2019 a company’s Accounts Receivable balance was $440,000. During the year the company recorded credit sales of $770,000 and cash collections of $820,000. In addition, the company wrote off $16,000 of accounts as uncollectible and reinstated and collected on an accounts receivable that was previously written off that totaled $3,000. The company uses the allowance method to account for its receivables.What is the effect of the accounting equation if the company fails to make the adjusting entry to record bad debt expense?
Answer: Option C - Assets are Overstated; No effects on liabilities: Equity is Overstated
Explanation:
When Bad debts are recorded, they will reduce the Accounts Receivable account because less money will be expected from debtors. Accounts Receivable is an asset account so it will be Overstated if bad debts are not recorded.
Equity will also be overstated because bad debts is an expense that is sent to the Income statement. If this expense is not deducted, the net income will be larger than it should be and when added to Equity it will overstate it.
Cutting flights and declaring bankruptcy are long-run decisions. What impact would you predict these actions would have on the airlines remaining in business?
Answer:
Follows are the solution to this question:
Explanation:
The declaration of bankruptcy as well as flight cutting reduces the amount for flights and also the flight sin operation leading to both a supply reduction. While the business continued, its other airlines will have an increased engagement and thus higher prices and will be seeing recovery for both the airline industry over an amount of time.
Bean Brewers, Inc., a manufacturer of coffee makers, had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) hours Account billing (lines) lines Account verification (accounts) accounts Correspondence (letters) letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) hours hours Account billing (lines) lines lines Account verification (accounts) accounts accounts Correspondence (letters) letters letters How much of the correspondence cost will be assigned to the Northeast Office? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)
Answer: B. $438
Explanation:
Correspondence Cost = Number of letters * Predetermined cost of correspondence
Predetermined cost of correspondence = Allocated cost/ Allocated base
= 14,000/1,600 letters
= $8.75 per letter
Northeast Office used 50 letters for correspondence.
Cost = 8.75 * 50
= $437.50
= $438
A company just starting business made the following four inventory purchases in June: Date Number of Units Purchased Total Cost June 1 100 units $ 360 June 10 150 units 585 June 15 150 units 610 June 28 100 units 520 $2075 A physical count of merchandise inventory on June 30 reveals that there are 240 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
Answer:
COGS= $985.67
Explanation:
Giving the following information:
Date Number of Units Purchased
June 1 100 units $360 ($3.6)
June 10 150 units 585 ($3.9)
June 15 150 units 610 ($4.067)
June 28 100 units 520 ($5.2)
A physical count of merchandise inventory on June 30 reveals that there are 240 units on hand.
First, we need to calculate the number of units sold:
Units sold= total units - units in ending inventory
Units sold= 500 - 240= 260
To calculate the cost of goods sold under the FIFO (first-in, first-out) method, we need to use the cost of the firsts units incorporated into inventory.
COGS= 100*3.6 + 150*3.9 + 10*4.067
COGS= $985.67
The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the:______________.
A) Flexible-budget variance.
B) Production-volume variance.
C) Total factory overhead variance.
D) Overhead efficiency variance.
E) Total overhead spending variance.
Answer: C. Total factory overhead variance
Explanation:
The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the total factory overhead variance.
Flexible budget variance is the difference that occurs between the results that are gotten by the flexible budget model and the actual results gotten.
Production volume variance is the difference that occurs between the budgeted production volume for a particular company and the actual volume of goods produced.
The correct option is C.
A semiannual coupon bond with face value of $1,000 has a coupon rate of 6% and matures in 16 years. The market-determined discount rate on this bond is 14%. What is the price of the bond?
Answer:
$1,125.30
Explanation:
The Price of the Bond is its Current/Trading price also known as the Present Value (PV). This is determined as follows :
Fv = $1,000
Pmt = $1,000 × 6% = $160
P/yr = 1
n = 16
i = 14%
PV = ?
Using the Financial calculator to enter the values as above, the Pv is $1,125.30.
Thus, the price of the bond is $1,125.30.
Available-to-Promise: (choose all that apply) Check All That Apply Tells the sales force how many products are available to sell.Tells the sales force how many products are available to sell. Coordinates production and sales efforts.Coordinates production and sales efforts. Takes into account current inventory, confirmed orders, and scheduled production.Takes into account current inventory, confirmed orders, and scheduled production. Helps to determine when production is scheduled.
Answer:
B. Coordinates production and sales efforts.
C. Takes into account current inventory, confirmed orders, and scheduled production.
Explanation:
Available to promise is a feature in businesses where the person in charge links up the available goods to the customer's demands. It is a coordination of production and sales.
The personnel representing the business checks the current level of production and tries to see if the current level of production or even the scheduled production can meet up with customer's demands. Some computer software are used to perform this operation in real-time.
What features of the 100 Yen Sushi House service delivery system differentiate it from the competition, and what competitive advantages do they offer?
Answer:
The summary and as per the query is defined in the following portion of the clarification.
Explanation:
The key characteristics including its 100 yen sushi management of service distribution system are its approaches to meal preparation and facilities on the manufacturing process. The client is also involved throughout the supply chain. The regular price, the conveyor belt mechanism throughout the location, which passes across the commercial counter, is three to four chefs on the floor.
The benefits of this are the people that follow:
High-tech independence including the use of clear methods. The positions that their operation involves repetition throughout their manufacturing method there might be other providers that could follow 100 yen sushi household operational efficiency. The distribution system used for the 100 yen sushi household delivery of services may also be regarded for car production. By only using throughout time method, the location uses freshly delivered food. The position has always had to estimate the volume of food purchased as well as cook it regularly according to the purchase request.Direct Materials Purchases Budget Pasadena Candle Inc. budgeted production of 775,000 candles for the January. Wax is required to produce a candle. Assume 11 ounces of wax is required for each candle. The estimated January 1 wax inventory is 17,900 pounds. The desired January 31 wax inventory is 14,300 pounds. If candle wax costs $1.80 per pound, determine the direct materials purchases budget for January. (One pound = 16 ounces.) Round all computed answers to the nearest whole number. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Pasadena Candle Inc. Direct Materials Purchases Budget For the Month Ending January 31 Pounds of wax required for production: Total units available Total pounds to be purchased Unit price $ Total direct materials to be purchased in January $
Answer:
952,583
Explanation:
Note: The desired December 31 wax inventory is 14,300 pounds. If candle wax costs $1.80 per pound, determine the direct materials purchases budget for January is the correct words
Pasadena Candle Inc.
Direct Materials Purchases Budget
For the Year Ending December 31
Pounds of wax required for production:
Candles (775,000*11/16) 532,813
Add: Desired ending inventory, 14,300
December 31
Total units available 547113
Less :Estimated beginning inventory, 17,900
January 1
Total pounds to be purchased 529,213
Total direct materials to be purchased = Total pounds to be purchased * Unit price
Total direct materials to be purchased = 529,213 * $1.80
Total direct materials to be purchased = 952,583
An upward-sloping labor supply curve implies that A) a firm can always hire more workers, even without increasing the wage. B) more workers are willing work when wages are low. C) more workers are willing to work as the market wage increases. D) the labor supply is fixed. E) there is a continuously increasing demand for labor.
Answer:
C) more workers are willing to work as the market wage increases.
Explanation:
As we see in the question that there is an increase in upward sloping of labor supply curve that means more and more workers are ready or willing to work in that case where the wages of the market increased
Therefore according to the options, the option C is correct as it mets the current situation and the same is to be considered
Hence, all other options are incorrect
Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $200,000, which includes interest revenue of $28,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above:
Answer:
1. Dr Income tax expense $43,000
Cr Deferred tax liability $2,500
Cr Income tax payable $40,500
2. $157,000
Explanation:
1. Preparation of the Journal entry to record income taxes in 2021
First step is to record income taxes in 2021
TAX RATE % TAX $ RECORDED AS
Pre-tax accounting income $200,000
Less Permanent difference ($28,000)
Income subject to Taxation
$172,000 ×25% $43,000 Income tax expense
Less Temporary difference
($10,000) ×25% - $2,500 Deferred tax liability
Income taxable in current year
$162,000 ×25% $40,500 Income tax payable
Calculation for Temporary difference
Depreciation in 2021 as per taxation=$40,000×50%
Depreciation in 2021 as per taxation=$20,000
Depreciation as per straight line=$40,000/4
Depreciation as per straight line=$10,000
Using this formula to calculate the Temporary difference
Temporary difference=Depreciation as per straight line-Depreciation in 2021 as per taxation
Let plug in the formula
Temporary difference=$20,000-$10,000
Temporary difference=$10,000
Preparation of Southern Atlantic Distributors JOURNAL ENTRY
Dr Income tax expense $43,000
Cr Deferred tax liability $2,500
Cr Income tax payable $40,500
(Being to record income tax expense)
2. Calculation for Southern Atlantic Distributors Net income
Income before income taxes $200,000
Less Income tax expense
Deferred tax liability ($2,500)
Income tax payable ($40,500)
Net income $157,000
($200,000-$2,500-$40,500)
Therefore 2021 Net income is $157,000
The value of what a Canadian-owned Tim Hortons produces in South Korea is included in the Canadian ________ and the South Korean ________
Answer: GNP; GDP
Explanation:
The value of what a Canadian-owned Tim Hortons produces in South Korea is included in the Canadian GNP and the South Korean GDP.
Gross National Product refers to the total amount of domestic production and foreign production that can be attributed to the residents of a nation.
This means that GNP includes the GDP and income earned by residents of the country in other countries but less the income earned by foreigners in the country. For Canada therefore, the value of goods produced by the Canadian company in South Korea will be added to the GNP.
Gross Domestic Product (GDP) on the other hand is simply the total final value of goods and services produced in a country regardless of if it was foreigners or residents doing the production. The value of what a Canadian-owned Tim Hortons produces in South Korea is therefore included in South Korea's GDP.
Business-process outsourcing (BPO) is a type of outsourcing that consists of contracting operations and responsibilities of a specific business process to a third-party service provider. Such outsourcing generally began with manufacturing firms outsourcing their supply chain but has grown into a much wider range of processes, including marketing, finance, sales, and accounting. According to a recent Forbes article, the revenue of the global outsourced services industry rose from $45 billion in 2000 to nearly $100 billion in 2012. An article in BusinessWeek suggested that BPO can save end users anywhere from 15 to 85 percent. International BPO service providers are particularly attractive since offshore labor offers an additional 25 to 30 percent cost savings. Furthermore, approximately 25 percent of the cost savings results from BPO firms’ proprietary products. The remaining 10 to 30 percent in cost reduction accrues from consolidated operations. Suppose you are the manager of a U.S.-based company and must decide whether to outsource your human resources department. Based on the above information and your study, please outline arguments supporting and opposing a decision to outsource this function of your business. Please explain from a purely business standpoint, any issues that might arise from contracting with an international-based versus U.S.-based BPO service firm? (Chapter 6, page 199)
Answer:
From a purely business perspective, outsourcing is likely to be right choice for the company, because as the statistics shown in the question prove, outsourcing offers great reduction in costs for American businesses.
However, there are some issues that could arise. The human capital in the foreign target country may not be as high as in the US, for example, and an outsourcing process could result in costs reduction, but also in a loss of quality in the company's operations.
There is also the human issue: outsourcing would require the firing of those employees whose jobs will be replaced by the outsourcing.
Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sells for $1,100. The firm could sell, at par, $100 preferred stock which pays a 5.52 percent annual dividend, but flotation costs of 5 percent would be incurred. Preston's beta is 1.2, the risk-free rate is 3 percent, and the market risk premium is 5 percent. The firm's marginal tax rate is 40 percent. What is Preston's WACC
Answer:
Follows are the solution to this question:
Explanation:
[tex]\text{Equity expense = free risk rate+beta} \times \text{market risk premium}[/tex]
[tex]=3 \% + 1.2 \times 5 \% \\\\= 0.03 + 1.2 \times 0.05 \\\\= 0.03 +0.06 \\\\= 0.09\\\\=9 \%[/tex]
[tex]\text{Preferred inventory cost} = \frac{\text{annual dividend}}{( price - floation \ rate)}[/tex]
[tex]= \frac{(100 \times 5.46 \%)}{(100-100 \times 5 \%)}\\\\=5.75 \%[/tex]
[tex]\text{Excel feature = RATE(nper, PMT, PV, FV)}[/tex]
[tex]=(RATE( \frac{20 \times 2,1000 \times 12 \%}{2,-1100,1000})) \times 2 \\\\=10.77 \%[/tex]
[tex]\text{Debt expense after tax}= 10.77 \% \times (1-40 \%)[/tex]
WACC from Preston = Capital weight [tex]\times[/tex] Capital equity costs+cost of common stock [tex]\times[/tex] cost of common shares [tex]\times[/tex] debt cost [tex]\times[/tex] (1-tax rate)
[tex]=60 \% \times 9 \%+20 \% \times 5.75 \%+20 \% \times 6.46 \% \\\\=7.84 \%[/tex]
what is supply chain management
Answer:
the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfilment from point of origin to point of consumption
Explanation:
A company offers ID theft protection using leads obtained from client banks. Three employees each work 40 hours a week on the leads. These employees are each paid $25 per hour. Each employee identifies an average of 3,000 potential leads a week. There are no duplications in these three lists. Material costs are $1,000 per week, and overhead costs are $9,000 per week. An average of 4 percent of the potential leads actually sign up for the service, paying a one-time fee of $70. Consider the output as the fees generated. a) What are the labor hours productivity and the multifactor productivity for this operation
Answer:
Output = 4%*3000 * $70 * 3
Output = $25,200
Labor hours productivity = Output / Labor hour
Where Labor hour = 3 * 40 hours = 120 hours
Labor hours productivity = $25,200 / 120 hours
Labor hours productivity = $210 per labor hour
Multi factor productivity for this operation = Output / Multi factor input
Where Multi factor input = 120*$25 + $1,000 + $9,000 = $13,000
Multi factor productivity for this operation = $25,200 / $13,000
Multi factor productivity for this operation = 1.938462
Multi factor productivity for this operation = 1.94
"A company manufactures a product using machine cells. Each cell has a design capacity of 250 units per day and an effective capacity of 230 units per day. At present, actual output averages 200 units per cell, but the manager estimates that productivity improvements soon will increase output to 229 units per day. Annual demand is currently 70,000 units. It is forecasted that within two years, annual demand will triple. How many cells will the company require to satisfy predicted demand under these conditions? Assume 243 workdays per year."
Answer:
Number of cells needed = 4
Explanation:
The current output averages 200 units per cell, but the output will soon increase to 229 units per cell per day due to productivity improvements.
The current demand is 70000 units per year and it will triple in 2 years. Hence annual demand to be fulfilled is 70,000*3 = 210,000 units per year.
Assuming 243 workdays per year
Hence, Output per day * 243 = 210000
Output per day = 210000 / 243
Output per day = 864.20
As each cell will produce 229 units per day, number of cells needed will be 864.20 / 229
Hence, Number of cells needed = 4
4. Give two reasons why GDP is often not seen as the best measure of living standards.
Answer:
Different factors account to it.
Explanation:
Because many factors that contribute to people's happiness are not bought and sold, GDP is a limited tool for measuring standard of living. To understand it's limitations better, let's take a look at several factors that are not accounted for in GDP.
GDP does not account for leisure time. The US GDP per capita is larger than the GDP per capita of Germany, but does this prove that the standard of living in the United States is higher? Not necessarily since it is also true that the average US worker works several hundred hours more per year more than the average German worker. The calculation of GDP does not take German workers extra weeks of vacation into account.
GDP includes what is spent on environmental protection, healthcare, and education, but it does not include actual levels of environmental cleanliness, health, and learning. GDP includes the cost of buying pollution-control equipment, but it does not address whether the air and water are actually cleaner or dirtier. GDP includes spending on medical care, but it does not address whether life expectancy or infant mortality have risen or fallen. Similarly, GDP counts spending on education, but it does not address directly how much of the population can read, write, or do basic mathematics.
If the price elasticity of demand for used cars priced between $4,000 and $6,000 is -0.9 (using the mid-point method), what will be the percent change in quantity demanded when the price of a used car falls from $6,000 to $4,000
Answer: 36% increase in quantity demanded.
Explanation:
Price Elasticity shows the change in quantity demanded when there is a change in price.
Change in Quantity demanded = Price elasticity * Change in price.
Change in price using midpoint formula;
[tex]= \frac{New price - Old Price}{\frac{New Price + Old Price }{2} } \\\\= \frac{4,000 - 6,000}{\frac{4,000 + 6,000 }{2} } \\\\= \frac{-2,000}{5,000} \\\\= -0.4[/tex]
Change in Quantity demanded = -0.9 * -0.4
= 0.36
= 36% increase
When the price of THE used car falls from $6,000 to $4,000, the percent change in quantity demanded will be 36% increase.
Explanation:
Price Elasticity basically shows the change in quantity demanded when there is a change in price.
The formula for Change in Quantity demanded = Price elasticity * Change in price.
Change in price using midpoint formula = New price - Old price / (New price - Old price / 2)
Change in price using midpoint formula = 4000 - 6000 / (4000 - 6000/ 2)
Change in price using midpoint formula = -0.4
Change in Quantity demanded = -0.9 * -0.4
Change in Quantity demanded = 0.36
Change in Quantity demanded = 36% increase
In conclusion, the percent change in quantity demanded will be 36% increase.
Read more about Price Elasticity
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ou can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) a. If the interest rate is 11%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)
Answer:
PV= $1,657,386.6
Explanation:
Giving the following information:
Future Value (FV)= $3,100,000
Interest rate (i)= 11%
Number of periods (n)= 6 years
To calculate the present value of the selling price, we need to use the following formula:
PV= FV/(1+i)^n
PV= 3,100,000 / (1.11^6)
PV= $1,657,386.6
CF Manufacturing purchased inventory for $5,300 and also paid a $280 freight in bill 2/10, net 30. CF Manufacturing returned 60% of the goods to the seller and paid the bill within the discount period. What is the final inventory cost
Answer: $2357.6
Explanation:
Purchased Inventory = $5300
Less: purchase return = 60% × $5300 = 0.6 × $5300 = $3180
Amount = $2120
Less: purchase discount = 2% × $2120 = 0.02 × $2120 = $42.4
Amount = $2077.6
Add: Freight in: $280
Final Inventory cost = $2357.6
Your pro forma income statement shows sales of , cost of goods sold as , depreciation expense of , and taxes of due to a tax rate of . What are your pro forma earnings? What is your pro forma free cash flow?
Answer and Explanation:
The computation is shown below:
Particulars Amount($)
Sales 1,033,000
Less:- Cost of goods sold (503,000)
Gross Profit 530,000
Less:- Depreciation (103,000)
EBIT 427,000
Taxes [40% of 427000] (170,800)
Earnings 256,200
1]Proforma earnings = $256200
2]Proforma free cash flow = Earnings + Depreciation
= $256,200 + $103,000
= $359,200
The proforma earnings is $256200 , and the pro-forma free cash flow is the value of earnings before depreciation. Hence the value is $359,200.
Pro Forma income statementwe are provided with the information about:
Sales = 1,033,000
Cost of goods sold = 503,000
Gross Profit = 530,000
Depreciation = 103,000
We need to find, the net profit,
Net Profit = Gross Profit - Depriciation
Net profit = 530000 - 103000 = 427000
Earnings is the amount after deduction of Tax rate (40%)
= 40% of 427000 = 170,800
Earnings = 427000 - 170800 = 256,200
Therefore the Proforma Earning is 256,200, Proforma free cash flow = Earnings + Depreciation
= $256,200 + $103,000
= $359,200
Your Question is incomplete, the complete question is:
Our proforma income statement shows sales of $1,033,000, cost of goods sold as $503,000, depreciation expense of $103,000, and taxes of $170,800 due to a tax rate of 40%. what are your proforma earnings? what is your proforma free cash flow?
Learn more about Depreciation here:
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Which of the following statements is the most accurate? Sole proprietorships are well suited for people who want to own a business and share in its profits without taking an active role in management. Sole proprietorships are the least risky form of business ownership. Sole proprietorships must receive a state charter before they can legally conduct business. Sole proprietorships are taxed at the owner's personal tax rate.
Answer:
D. Sole proprietorships are taxed at the owner's personal tax rate
Explanation:
Sole Proprietorship can be defined as a simplest form of owning and starting any business. As the term suggests, this business is onwed by an individual only or shared by married couples.
Sole properietorship is easy to set up because the owner need not to register itself to state government, therefore, because of absence of governmental involvement, it is easy to set up or deconstruct sole proprietorship.
From the given options, the statement which is most accurate about a sole proprietorship is option D. The owner of sole proprietorship pays personal taxes on the profits earned by his/her business.
Therefore, option D is correct.
. Use the following adjustment information to complete the Adjustments columns of the work sheet. Depreciation on equipment, $18 Accrued salaries, $21 The $27 of unearned revenue has been earned Supplies available at December 31, $90 Expired insurance, $30 3. Extend the balances in the Adjusted Trial Balance columns of the work sheet to the proper financial statement columns. Compute totals for those columns including net income.
Question Completion:
Since the Trial Balance was not provided, we assume that the Supplies account had a beginning balance of $120 for the purpose of this exercise. Any other figure can be substituted for this balance.
Answer:
Adjusted Trial Balance as of December 31: Income Statement Balance
Debit Credit Expense Revenue Sheet
a. Depreciation expense $18 $18
Accumulated Depreciation $18 -$18 assets
b. Accrued Salaries $21 $21
Salaries Payable $21 $21 liabilities
c. Unearned Revenue $27 -$27 Liab.
Earned Revenue $27 $27
d. Supplies Expense $30 $30
Supplies $30 -$30 assets
e. Insurance Expense $30 $30
Prepaid Insurance $30 -$30 assets
Explanation:
Company B with the adjusting events above, usually recorded through the adjusting journal, can also be adjusted directly in the trial balance with their effects on the financial statements clearly demonstrated. Expenses have debit accounts while liabilities have credit accounts. Expenses reduce the net income, revenues increase the net income, while liabilities and assets can be reduced or increased as the case may be.
The expected return on the market portfolio is 12%, and the relevant risk-free rate is 4.2%. What is the equity premium?
Answer:
7.8%
Explanation:
The expected return on the market portfolio is 12 percent
The risk free rate is 4.2 percent
Therefore the equity premium can be calculated as follow
= expected return - risk free rate
= 12% - 4.2%
= 7.8%
Hence the equity premium is 7.8%
On October 1, 2020, Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson's management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these damages is $5,000,000. Jackson's insurance policy of $9,000,000 has a deductible clause of $500,000. How should Jackson Chemical report this information in its financial statements at December 31, 2020
Answer:
Jackson Chemical should report the $5,000,000 loss because we don't know if the insurance will actually pay out the policy.
Explanation:
Jackson chemical has to report $500,000 loss associated with the deductible would be accrued as liability in the company's financial statements at Dec 31, 2020 since it is probably that Jackson will be responsible for the damages.
$500,000 is the amount of the insurance policy's deductible Jackson will have to pay to receive the policy's benefits, which will cover the reasonably estimated damages.
Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $900,000 of overhead during the next period, and expects to use 60,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's overhead application rate
Answer:
150%
Explanation:
Calculation for overhead application rate
First step is to calculate the Total Direct labor cost
Total Direct Labor Cost = 60,000 hours * $10/hr Total Direct Labor Cost= $600,000
Last step is to calculate Overhead application rate
Overhead application rate = $900,000/$600,000
Overhead application rate = 1.5*100
Overhead application rate=150%
Therefore Cosi Company's overhead application rate is 150%
Exercise 17-5 Assigning costs using ABC LO P3 Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Assume that the following information is available for the company’s two products for the first quarter of this year. Deluxe Model Basic Model Production volume 10,000 units 30,000 units Parts required 20,000 parts 30,000 parts Batches made 250 batches 100 batches Purchase orders 50 orders 20 orders Invoices 50 invoices 10 invoices Space occupied 10,000 sq. ft. 7,000 sq. ft Models 1 model 1 model Required: Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model? (Round activity rate and average OH cost per unit answers to 2 decimal places.)
Answer:
Instructions are below.
Explanation:
First, we need to calculate the activity rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Handling materials= 625,000/100,000= $6.25 per part
Inspecting product= 900,000/1,500= $600 per batch
Processing= 105,000/700= $150 per order
Paying suppliers= 175,000/500=$350 per invoice
Insuring the factory= 300,000/40,000= $7.5 per square feet
Designing packaging= 75,000/2= $37,500 per model
Now, we can allocate overhead to each model:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Deluxe:
Handling materials= 6.25*20,000= 125,000
Inspecting product= 600*250= 150,000
Processing= 150*50= 7,500
Paying suppliers= 350*50= 17,500
Insuring the factory= 7.5*10,000= 75,000
Designing packaging= 37,500*1= 37,500
Total allocated overhead= $412,500
Basic:
Handling materials= 6.25*30,000= 187,500
Inspecting product= 600*100= 160,000
Processing= 150*20= 3,000
Paying suppliers= 350*10= 3,500
Insuring the factory= 7.5*7,000= 52,500
Designing packaging= 37,500*1= 37,500
Total allocated overhead= $444,000
Finally, the unitary overhead:
Deluxe= 412,500/10,000= $41.25
Basic= 444,000/30,000= $14.8