Answer:
the cash inflow from the sale of securities is $7,000
Explanation:
The computation of the cash inflow from the sale of securities is shown below:
= Opening balance + purchase marketable securities + gain on the sale of marketable securities - ending balance
= $86,000 + $10,000 + $1,000 - $90,000
= $97,000 - $90,000
= $7,000
hence, the cash inflow from the sale of securities is $7,000
Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar torise in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will thereforefall , and the number of foreign products purchased by domestic consumers and firms (imports) willrise . Net exports will thereforefall , causing the quantity of domestic output demanded tofall . This phenomenon is known as theexchange rate effect
Answer:
rise, fall, rise, fall, fall, exchange rate
Explanation:
When there is a change in the level of price it will cause the real value to change as well. This is due to the fact that real value is basically relative price i.e., nominal value adjusted by inflation.
This rise in price effects the demand for exports, which in return falls due to higher goods rates. And the effect is opposite for imports which would now rise. The combination effect of imports and exports results in the change in the net exports which would also fall due to rise in imports and fall in the exports. Overall, this effect is known as the exchange rate effect.
During lunch time, customers arrive at a postal office at a rate of lambda equals 36 per hour. The interarrival time of the arrival process can be approximated with an exponential distribution. Customers can be served by the postal office at a rate of mu equals 45 per hour. The service time for the customers can also be approximated with an exponential distribution. For each of the following questions, show your work and use the right notation.
Required:
a. Determine the utilization factor.
b. Determine the probability that the system is idle, i.e., no customer is waiting or being served.
c. Determine the probability that exactly one customer is in the system, i.e., no customer is waiting but one is served.
Answer:a) utilization factor, P =4/5
b)Probability that the system is idle, P₀=1/5
C) the probability that exactly one customer is in the system,P ₁=4/25
Explanation:
A)
From the question,
Customer arrives at the rate of λ equal 36 per hour
Also,
Customers can be served by the postal office at a rate of μ equals 45 per hour
Therefore, we have that
utilization factor. P = λ / μ
where
λ = 36 / hour
μ = 45 / hour
P= 36 / 45
P= 4/5
The utilization factor is 4/5
b) the probability that the system is idle, i.e., no customer is waiting or being served.
Probability that the system is idle P₀ =1 - P
1 - 4/5
=1/5
C) the probability that exactly one customer is in the system, i.e., no customer is waiting but one is served.
probability that exactly one customer is in the system,P ₁=(λ/μ)¹ x (1-λ/μ)
(36 / 45) x (1-36 / 45)
4/5 x (1-4/5)
4/5 x 1/5
=4/25
DJH Enterprises has 3 departments. Operating results for 2019 are as follows:
Department 1 Department 2 Department 3
Sales $670,000 $322,000 $856,000
Variable costs 445,000 287,000 602,000
Contribution margin $225,000 $35,000 $254,000
Direct fixed expenses $120,000 $27,000 $163,000
Common fixed expenses 75,000 30,000 94,000
Total fixed expenses $195,000 $57,000 $257,000
Operating income (loss) $30,000 ($22,000) ($3,000)
DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated. What effect would elimination of Department 2 have on DJ H's total operating income?
Answer:
DJH Enterprises
The effect of eliminating Department 2 will increase the total operating income to $27,000 from $5,000.
Explanation:
a) Data and Calculations:
Operating Results for 2019 for the three departments:
Department 1 Department 2 Department 3 Total
('000)
Sales $670,000 $322,000 $856,000 $1,848
Variable costs 445,000 287,000 602,000 1,334
Contribution margin $225,000 $35,000 $254,000 $514
Direct fixed expenses $120,000 $27,000 $163,000 $310
Common fixed expenses 75,000 30,000 94,000 199
Total fixed expenses $195,000 $57,000 $257,000 509
Operating income (loss) $30,000 ($22,000) ($3,000) $5
Loss-making departments eliminated:
Department 1 Department 3 Total
Sales $670,000 $856,000 $1,526,000
Variable costs 445,000 602,000 1,047,000
Contribution margin $225,000 $254,000 $479,000
Direct fixed expenses $120,000 $163,000 $283,000
Common fixed expenses 75,000 94,000 169,000
Total fixed expenses $195,000 $257,000 $452,000
Operating income (loss $30,000 ($3,000) 27,000
Paid $54,000 cash to replace a motor on equipment that extends its useful life by four years. Paid $270 cash per truck for the cost of their annual tune-ups. Paid $216 for the monthly cost of replacement filters on an air-conditioning system. Completed an addition to a building for $303,750 cash. 1. Classify the above transactions as either a revenue expenditure or a capital expenditure. 2. Prepare the journal entries to record the four transactions from part 1.
Answer:
see explanation
Explanation:
revenue expenditure is cost that improves a capital asset
capital expenditure is cost incurred to maintain daily operations
Dream House Builders, Inc. applies overhead by linking it to direct labor. At the start of the current period, management predicts total direct labor costs of $100,000 and total overhead costs of $20,000. On January 31, the direct labor for this job equals $2,700.
Required:
Write the journal entry.
Answer:
Explanation:
To solve this question, we need to calculate the predetermined overhead rate first and this will be:
= Estimated overhead / Direct labor cost
= $20,000 / $100,000
= 20% of cost of direct labor
Then we calculate the factory overhead which will be:
= Direct Labor × Predetermined overhead rate
= $2700 × 20%
= $540
Then, the journal entry will be:
31 Dec:
Debit Work in Process $540
Credit: Factory overhead $540
(To record overhead applied).
The cost of materials transferred into the Rolling Department of Keystone Steel Company is $510,000 from the Casting Department. The conversion cost for the period in the Rolling Department is $81,200 ($54,700 factory overhead applied and $26,500 direct labor). The total cost transferred to Finished Goods for the period was $553,200. The Rolling Department had a beginning inventory of $25,000.
Required:
a. Journalize the cost of transferred-in materials.
b. Journalize the conversion costs.
c. Journalize the costs transferred out to Finished Goods.
d. Journalize the costs transferred out to Finished Goods.
e. Determine the balance of Work in Process—Rolling at the end of the period.
Answer:
Part a
Debit : Work in Process - Rolling Department $510,000
Credit : Work in Process - Casting Department $510,000
Part b
Debit : Work in Process - Overheads $54,700
Debit : Work in Process - Direct labor $26,500
Credit : Accounts Payable $81,200
Part c
Debit : Finished Goods Inventory $553,200
Credit : Work in Process - Rolling Department $553,200
Part d
Debit : Finished Goods Inventory $553,200
Credit : Work in Process - Rolling Department $553,200
Part e
$18200 credit
Explanation:
Ending Balance = Opening Balance + Additions - Transfers out
therefore,
Rolling Department balance = $25,000 + $510,000 - $553,200
= ($18200)
Also see journal prepared above.
In the last example, we determined that Delta has a DTA of $35,000 related to the $100,000 NOL in 2015. In 2016, it decides to apply (use up) the DTA (carryforward). The company has book income of $200,000. No book/tax differences. So, Delta reports taxable income of $200,000 before considering the effect of its NOL. How much is I.T. payable for 2016
Answer:
The I.T. payable for 2016 is $35,000
Explanation:
Use the following formula to calculate the IT payable for 2016
IT payable = Tax on Income - DTA balance
Where
Tax on Income = Income x Tax rate = $200,000 x 35% = $70,000
DTA balance = $35,000
Placing values in the formula
IT payable = $70,000 - $35,000
IT payable = $35,000
Malco Enterprises issued $10,000 of common stock when the company was started. In addition, Malco borrowed $36,000 from a local bank on July 1, Year 1. The note had a 6 percent annual interest rate and a one-year term to maturity. Malco Enterprises recognized $72,500 of revenue on account in Year 1 and $85,200 of revenue on account in Year 2. Cash collections of accounts receivable were $61,300 in Year 1 and $71,500 in Year 2. Malco paid $39,000 of other operating expenses in Year 1 and $45,000 of other operating expenses in Year 2. Malco repaid the loan and interest at the maturity date.
Required:
Based on this information, answer the following questions.
a. What amount of interest expense would Malco report on the Year 1 income statement?
b. What amount of net cash flow from operating activities would Malco report on the Year 1 statement of cash flows?
c. What amount of total liabilities would Malco report on the December 31, Year 1, balance sheet?
d. What amount of retained earnings would Malco report on the December 31, Year 1, balance sheet?
e. What amount of net cash flow from financing activities would Malco report on the Year 1 statement of cash flows?
f. What amount of interest expense would Malco report on the Year 2 income statement?
g. What amount of net cash flow from operating activities would Malco report on the Year 2 statement of cash flows?
h. What amount of total assets would Malco report on the December 31, Year 2, balance sheet?
i. What amount of net cash flow from investing activities would Malco report on the 2017 statement of cash flows?
j. If Malco Enterprises paid a $2,000 dividend during Year 2, what retained earnings balance would it report on the December 31, Year 2, balance sheet?
Answer:
Malco Enterprises
a. The amount of interest expense on Year 1 income statement:
= $1,080
b. The amount of net cash flow from operating activities on the Year 1 statement of cash flows:
= $22,300
c. Total liabilities on the December 31, Year 1 Balance Sheet
= $37,080
d. The amount of retained earnings on the December 31, Year 1 balance sheet is:
= $ 32,420
e. The amount of net cash flow from financing activities on the Year 1 Statement of Cash Flows is:
= $10,000
f. The amount of interest expense on the Year 2 Income Statement is:
= $1,080.
g. The amount of net cash flow from operating activities on the Year 2 Statement of Cash Flows is:
= $24,340
h. The amount of total assets on the December 31, Year Balance Sheet is:
= $79,500.
i. The amount of net cash flow from investing activities on the Year 2 Statement of Cash Flows is:
= $0
j. Retained Earnings on the December 31, Year 2 Balance Sheet:
= $69,540
Explanation:
a) Data and Analysis:
1. Year 1: Cash $10,000 Common stock $10,000
2. July 1, Year 1: Cash $36,000 6% Notes Payable $36,000
3. Year 1: Accounts Receivable $72,500 Revenue $72,500
5. Year 1: Cash $61,300 Accounts Receivable $61,300
7. Year 1: Operating expenses $39,000 Cash $39,000
8. Year 1: Interest expense $1,080 Interest payable $1,080
4. Year 2: Accounts Receivable $85,200 Revenue $85,200
6. Year 2 Cash $71,500 Accounts Receivable $71,500
8. Year 2: Operating expense $45,000 Cash $45,000
9. Year 2, July 1: Notes Payable $36,000 Cash $36,000
10. Year 2, July 1: Interest Expense $1,080 Interest payable $1,080 Cash $2,160
a. The amount of interest expense on Year 1 income statement:
6% of $36,000 * 6/12 = $1,080
b. The amount of net cash flow from operating activities on the Year 1 statement of cash flows:
= $22,300 ($61,300 - $39,000)
c. Total liabilities on the December 31, Year 1 Balance Sheet = $37,080 ($36,000 + $1,080)
d. The amount of retained earnings on the December 31, Year 1 balance sheet is:
= $ 32,420
Revenue $72,500
Operating expenses $39,000
Interest expense $1,080
Net income = $32,420
e. The amount of net cash flow from financing activities on the Year 1 Statement of Cash Flows is:
= $10,000 (Common stock)
f. The amount of interest expense on the Year 2 Income Statement is:
= $1,080.
g. The amount of net cash flow from operating activities on the Year 2 Statement of Cash Flows is:
= $24,340
Accounts Receivable $71,500
Operating expense $45,000
Interest on notes $2,160
Net cash flow $24,340
h. The amount of total assets on the December 31, Year Balance Sheet is:
= $79,500
Cash balance $68,300
Accounts receivable $11,200
Total assets = $79,500
i. The amount of net cash flow from investing activities on the Year 2 Statement of Cash Flows is:
= $0
j. Retained Earnings on the December 31, Year 2 Balance Sheet:
= $69,540
Retained earnings, beginning balance $32,420
Net income 39,120
Dividends (2,000)
Retained earnings, ending balance $69,540
Revenue $85,200
Operating expenses $45,000
Interest expense $1,080
Net income $39,120
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. False: Flotation costs need to be taken into account when calculating the cost of issuing new common stock, but they do not need to be taken into account when raising capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm’s existing common equity, while the cost of new common stock is based on the value of the firm’s share price net of its flotation cost.
Answer: False: Flotation costs need to be taken into account when calculating the cost of issuing new common stock, but they do not need to be taken into account when raising capital from retained earnings.
Explanation:
When issuing common stock, the firm will need to pay certain floatation costs such as underwriting fees, legal fees, and registration fees. These will reduce the net amount received from the floatation of new securities.
When raising capital from the retained earnings however, the company can avoid flotation costs because they would be acquiring funds internally and so do not have to worry about paying other entities to access it.
You send out 20,000 emails. Of those, 6% are opened. Of those, 9% click on a link to register for something. Of those who clicked the link, 30% complete the registration. How many people completed the registration?
The units of an item available for sale during the year were as follows: Jan 1 Inventory 22 units at 127 April 15 Purchase 138 units at 117 September 9 Purchase 27 units at 125 There are 42 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the last-in, first-out (LIFO)
Answer:
$5,134
Explanation:
LIFO assumes that the units to arrive last are sold first Therefore inventory value is based on earlier (old) prices.
Step 1 : Calculate units sold
Units sold = Units Available for sale - units in inventory
= 145 unit
Step 2 : Determine Inventory Value
Inventory value = 22 units x $127 + 20 units x $117
= $5,134
Conclusion
the inventory cost using the last-in, first-out (LIFO) is $5,134
in your own opinion, what is the advantages and disadvantages of having a business website.
Answer:
There are several advantages and disadvantages to having a website for your business or limited company. In the modern age, more and more businesses are getting online. As I mentioned in a previous post, there were around 227,225,642 websites online in September 2010. If you don’t take your business onto the World Wide Web, you could miss out on potential customers, sales and profits. According to data collected by the Office for National Statistics – internet sales were up to £473million (a week) in August 2010 (Retail Sales Statistical Bulletin – August 2010). So having a website designed for your small business or limited company is just one important step towards getting a slice of the internet pie.
Beachfront property owners of the Town of Eden Beach requesteda financed through a note payable, which was to be repaid from taxes raised through a special assessment on their properties. The Town guarantees the debt and accounts for the special assessment through a debt service fund. Assume the special assessments were levied in 2016, recording a special assessment receivable an assessment is to be collected each year and used to pay the interest and principal on the note d deferred inflow in the amount of $480,000. One-third of the
Record the following transactions that occurred in 2017
1 June 30. S160000 of the assessments became due and currently receivable (Hint The special assessment tax is recorded as revenue in the debt service fund when it becomes due)
2. July 31, the $160.000 was collected
3 September 30, interest of $24.000 and principal of $136.000 were paid
4 December 31, the books were closed
If no entry is required for e transaction/event, select "No Journal Entry Required" in the first account field.)
Answer: See explanation
Explanation:
The journal entries for the transaction goes thus:
June30:
Debit Deferred revenue 160,000
Credit Special assessment revenue 160,000
July 31:
Debit Cash 160,000
Credit special assesement tax receivable 160,000
September 30:
Debit interest expenditure 24,000
Debit principal expenditure 136,000
Credit cash 160,000
December 31:
Debit Special assesement revenue 160,000.00
Credit interest expenditure 24,000
Credit Principal expenditure 136,000
Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below. January 1 December 31 Direct materials $ 77,000 $ 40,000 Work in process 66,000 42,000 Finished goods 115,000 100,000 Other information Direct materials purchases $ 324,000 Cost of goods available for sale 950,000 Actual factory overhead costs 260,000 The cost of direct materials used for production is:
Answer:
$361,000
Explanation:
Direct materials used = Beginning Materials + Purchases - Ending Materials
therefore,
Direct materials used = $ 77,000 + $ 324,000 - $ 40,000 = $361,000
Conclusion
The cost of direct materials used for production is $361,000.
A bank has $50 million in assets, $47 million in liabilities and $3 million in shareholders' equity. If the duration of its liabilities are 1.3 and the bank wants to immunize its net worth against interest rate risk and thus set the duration of equity equal to zero, it should select assets with an average duration of _________.
Answer: 1.222
Explanation:
The Average duration can be derived from the formula:
Assets * Average Duration = Liabilities * Duration of Liabilities
Average Duration = (Liabilities * Duration of Liabilities) / Assets
= (47,000,000 * 1.3) / 50,000,000
= 61,100,000 / 50,000,000
= 1.222
Carla McFarland was an associate professor of English literature at Highland College. She was the only single person in her department. Consequently, she was frequently assigned classes late in the evening, on weekends, and during the summer semester. She was also called upon to pick up visiting professors and serve as their escort and guide during their stays at the college. She received extra duty as adviser to the The Highland Review, the college’s literary magazine. When McFarland complained about the unequal treatment, she was told that the married professors had family responsibilities that she did not have, which took up much of their time and prevented them from having the flexibility that she had. Thus, she would continue to carry the extra load. McFarland filed a complaint with the EEOC.
Required:
Can discrimination based on an employee’s status as a single person be considered unlawful under the Civil Rights Act? Explain. Is this a case of disparate impact or disparate treatment? Explain.
Answer and Explanation:
The case shown above is an example of discrimination by civil status, however it is not an example of violation of the civil rights law, as it is not prohibited by the Civil Rights Act of 1964. However, some states have their own legislation that prevents this type of discrimination, which makes it a violation of state laws, which can lead the offender to be severely punished.
This is an example of case of disparate treatment, as we can see that there is discriminatory treatment with an employee, where she is treated differently compared to other employees because of a characteristic of her personal life.
This would be a case of disparate impact if there were a group of protected and privileged employees at the expense of the exploitation of other employees.
Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 11 percent is applied
Answer:
$29.47
Explanation:
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
To find the PV using a financial calculator:
Cash flow in year 1 = 2
Cash flow in year 2 = 2.2
Cash flow in year 3 = 2.4 + 33
I = 11
PV = 29.47
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
To be effective, an item used as money should serve several functions. Select the statement that best describes money's function as a standard of deferred payment.
a. That a currency can be used to express the value goods and services that are both relatively expensive and goods and services that are relatively cheap.
b. That the purchasing power of a currency is relatively stable over time.
c. That people are willing to accept a currency in the future as compensation for debts accrued earlier.
d. That a currency is widely accepted in exchange for goods and services and therefore makes economic transactions easier.
Answer:
c. That people are willing to accept a currency in the future as compensation for debts accrued earlier.
Explanation:
Money defines the legal tender i.e. offically issued and that involved the notes, currencies, coins that are circulated via medium of exchange that govern by the government.
So here the people would to accept the currency in the future that become compensation for the debt that accrued earlier
Hence, the option c is correct
Johnson is a volunteer fireman for Prince George's County. One evening, he responds to an alarm at a residence. Outside the house, Bob grabs Johnson by the shoulders and says: My little daughter is in the house. Please save her! I'll pay you $20,000.00 if you get her out alive! Johnson bravely rushes into the burning house and rescues the little girl. The next day, Johnson finds Bob and asks for his check. Bob refuses to pay. Under these facts
a. Johnson will lose based on the theory of preexisting duty.
b. Johnson will lose based on the theory of past consideration
c. Johnson will be awarded the money based on the theory of ordinary contract law
d. Johnson will be awarded the money based on the theory of necessity
Answer: a. Johnson will lose based on the theory of preexisting duty.
Explanation:
Based on the information given in the question, Johnson will lose based on the theory of preexisting duty.
According to the theory of preexisting duty, when an individual is under the pre-existing duty to perform ans.auch person is under a contract, there will not be any consideration when there's a modification of the contract and then the modification is void.
In this case, it is the duty of Johnson to save lives as a firefighter. Therefore, saving the daughter of Bob simply means that he's performing his duty and if Bob refuses to pay him, Johnson will lose based on the theory of preexisting duty.
What are references?
Answer:
Explanation:
Let us say you are doing an essay on the gold trade on the comex. You have to read something to understand what it means to buy gold on the comex. You need to at least know what it takes to buy and sell on the comex.
What you read to find out is a reference. It has to be listed in a Bibliography which is a list of references.
The cost of materials transferred into the Rolling Department of Keystone Steel Company is $571,100 from the Casting Department. The conversion cost for the period in the Rolling Department is $111,000 ($68,000 factory overhead applied and $43,000 direct labor). The total cost transferred to Finished Goods for the period was $669,000. The Rolling Department had a beginning inventory of $26,800.
Required:
a. On June 30, journalize the cost of transferred-in materials.
b. On June 30, journalize the conversion costs.
c. On June 30, journalize the costs transferred out to Finished Goods.
Answer:
Part a
Debit : Work in Process : Casting Department $571,100
Credit : Work In Process : Rolling Department $571,100
Being Cost of materials transferred from Casting Department to Rolling Department
Part b
Debit : Work In Process : Overheads $68,000
Debit : Work In Process : Direct Labor $43,000
Credit : Overheads $68,000
Credit : Salaries Payable $43,000
Being factory overhead applied and direct labor incurred
Part c
Debit : Finished Goods Inventory $669,000
Credit : Work in Process : Rolling Department $669,000
Being Cost transferred to Finished Goods for the period
Explanation:
Journal entries for the transactions have been prepared above.
Manufacturers use several different production processes to create goods and services.
a. True
b. False
Answer:
A) true
Explanation:
Manufacturing involves converting raw materials into useful finished product. Manufacturers engage different production processes in creation of goods/ services, and the choice of process to use is dependent on the kind of products/ goods that were to be produced. In choosing process or production methods desires of the market as well as available resources and volumes need to be put into consideration. For instance, in steel manufacturing, the process is one that requires a continuous process, therefore, CONTINUOUS PROCESS is used. A production plant involving working together of both workers and robot works together in assembling if automobiles requires a "ASSEMBLY PROCESS"
RedRaider Corp's common stock has a beta of 0.99. If the risk free rate of return is expected to be 3.03% and the market risk premium is 6.93%, what is the cost of equity for RedRaider Corp's common stock
Answer:
9.89%
Explanation:
pestel analysis for security industry in uk
Explanation:
PESTEL analysis is an acronym for Political, Economic, Socio-cultural, Technological, Environmental, and Legislative, and it is probably one of the most well-known top-level battle-hardened business planning tools. It was simply PEST analysis when we first came across the tool, some 30 years ago: the EL was added along the way to make it more all-encompassing.
When should you use it?
PESTEL is most commonly used in what economists refer to as a "macroeconomic analysis," which simply means thinking about future plans - to you and me, business planning and strategy. It is one of the most well-known and battle-tested top-level business planning tools.
Your credit card statement had your interest rate at 16.5%. When you open your statement the rate went up to 18.2%. Can the credit card company do that without notifying you?
Answer:
Definitely not
Explanation:
I mean, it's YOUR account; they can't just do that, to my inderstanding.
You expect General Motors (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil (XOM) to be 0.9 over the next year. Also, you expect the volatility of General Motors to be 40% and that of Exxon Mobil to be 30% over the next year. Which stock has more systematic risk? Which stock has more total risk? A) XOM, GM B) XOM, XOM C) GM, XOM D) GM, GM E) Not enough information to answer the question
Answer:
d
Explanation:
Systemic risk are risk that are inherent in the economy. They cannot be diversified away. They are also known as market risk. examples of this risk include recession, inflation, and high interest rates. Investors should seek compensation for systemic risk. Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors
GM has a higher beta and thus it has a higher systemic risk
total risk is measured by volatility. The higher the volatility, the higher the total risk . GM has a higher volatility
Suppose there are only two firms that sell smartphones: Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones.
Pictech Pricing
High Low
Flashfone Pricing High 11, 11 2, 18
Low 18, 2 10, 10
For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million, and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms.
a. If Flashfone prices high, Pictech will make more profit if it chooses a (high,low) _____ price, and if Flashfone prices low, Pictech will make more profit if it chooses a(high,low)_______ price.
b. If Pictech prices high, Flashfone will make more profit if it chooses a(high,low)______price, and if Pictech prices low, Flashfone will make more profit if it chooses a (high,low) ______ price.
c. Considering all of the information given, pricing high (is, is not) ______ a dominant strategy for both Flashfone and Pictech.
Answer:
Flashfone and Pictech
a. If Flashfone prices high, Pictech will make more profit if it chooses a (high,low) __low___ price, and if Flashfone prices low, Pictech will make more profit if it chooses a(high,low)___low____ price.
b. If Pictech prices high, Flashfone will make more profit if it chooses a(high,low)__low____price, and if Pictech prices low, Flashfone will make more profit if it chooses a (high,low) __low____ price.
c. Considering all of the information given, pricing high (is, is not) _is not_ a dominant strategy for both Flashfone and Pictech.
Explanation:
a) Data and Calculations:
Pictech Pricing
High Low
Flashfone Pricing High 11, 11 2, 18
Low 18, 2 10, 10
b) A dominant strategy exists if Pictech or Flashfone would implement a particular strategy that benefits it no matter what the other firm does.
Speedy Bikes could sell its bicycles to retailers either assembled or unassembled.
The cost of an unassembled bike is as follows:
Direct materials $150
Direct labor 70
Variable overhead (70% of direct labor) 49
Fixed overhead (30% of direct labor) 21
Manufacturing cost per unit $290
The unassembled bikes are sold to retailers at $450 each.
Speedy currently has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity can be used to assemble the bikes and sell them at $495 each. Assembling the bikes will increase direct materials by $5 per bike, and direct labor by $10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes.
Additional variable overhead will be incurred at the normal rates but there will be no additional fixed overhead as a result of assembling the bikes.
Required:
a. Prepare an incremental analysis for the sell-or-process-further decision.
b. Should Speedy sell or process further?
Why or why not?
Answer:
Speedy Bikes
a. Incremental Analysis for the sell-or-process-further decision:
Cost of an Cost an Difference
unassembled bike assembled bike
Alternative 1 Alternative 2 Increment
Sales price of unassembled bike $450 $495 $45
Manufacturing cost per unit $290 $312 (22)
Net operating income $160 $183 $23
b. Speedy should process the bikes further.
c. It will generate an incremental net operating income of $23 per bike.
Explanation:
a) Data and Calculations:
Cost of an Cost an
unassembled bike assembled bike
Direct materials $150 $155
Direct labor 70 80
Variable overhead (70% of direct labor) 49 56 ($80 * 70%)
Fixed overhead (30% of direct labor) 21 21
Manufacturing cost per unit $290 $312
Residual Income The operating income and the amount of invested assets in each division of Otte Industries are as follows: Operating Income Invested Assets Retail Division $ 8,000,000 $40,000,000 Commercial Division 12,750,000 75,000,000 Internet Division 270,000 1,800,000 Assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $8,000,000 $12,750,000 $270,000 Minimum acceptable operating income as a percent of invested assets fill in the blank 1 fill in the blank 2 fill in the blank 3 Residual income $fill in the blank 4 $fill in the blank 5 $fill in the blank 6
Answer: See explanation
Explanation:
The residual income for each division will be calculated as follows:
Retail division:
Operating income = $8,000,000
Less: Minimum acceptable operating income as a percentage of invested assets = 10% × $40,000,000 = $4,000,000
Residual income = $4,000,000
Commercial division:
Operating income = $12,750,000
Less: Minimum acceptable operating income as a percentage of invested assets = 10% × $75,000,000 = $7,500,000
Residual income = $5,250,000
Internet division:
Operating income = $270,000
Less: Minimum acceptable operating income as a percentage of invested assets = 10% × $1,800,000 = $180,000
Residual income = $90,000
From the information above, we can also see that the commercial division has the highest residual value.
A manufacturing company accumulates the following data on variable overhead: Actual cost incurred: $61,000; Actual allocation base times the standard variable rate: $64,000; Applied variable overhead: $60,000. The variable overhead efficiency variance is:
Answer: $4000U
Explanation:
From the information given in the question, the variable overhead efficiency variance is the difference between the actual allocation base times the standard variable rate and the applied variable overhead. This will be:
= $64000 - $60000
= $4000U
Therefore, the variable overhead efficiency variance is $4000U