Answer:
The Korean Won is undervalued
Explanation:
The Korean Won is undervalued if we determine this measure by comparing the prices of the vanilla latte at a Korean Starbucks and at an American Starbucks.
If purchasing power parity was perfectly equal, the latte at the Seoul Starbucks would be priced at $3,450, because the exchange rate is 1,150/$ and $3 x 1,1150 = 3,450, $3 being the price of the latte in New York City.
We can see that the latte in Seoul only costs 3,000 Won, so, under this comparison, the Won is undervalued by 450 Won.
Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000. Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps. Inc.
a. If Jamie decides to embark on her new venture, What will her accounting cost be during the first year of operation? Her implicit costs? Her opportunity costs?
Accounting costs: $_____
Implicit costs: $_____
Opportunity costs: $_____
b. Suppose that Jamie's estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? Positive economic profits?
Revenue needed to earn positive accounting profits: $______
Revenue needed to earn positive economic profits:
Answer:
Follows are the solution to the given points:
Explanation:
For point A:
Cost with accounting=The actual manufacturing expenditures or spendings that appear on expensive sports or record of a company= [tex]\$ 145,000[/tex]
[tex]\text{Costs = gross pay} = 50000 \times 4 - 1.2 \times1,45,000 = 26000\\\\{ total \ cost = 120 \% \ of\ 145,000}[/tex]
Cost opportunity=75,000
Total revenue required besides positive accounting benefits=cost of accounting =145000
Income to create positive economic benefits=cost of accounts + implied cost
[tex]= 145000+26000=171000[/tex]
For point B:
Income required to make positive profit in accounts = 145,000 more than the accounting costs
Revenue necessary to earn positive profit = 220,000 more than opportunity cost
AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:
Fixed Component Variable Component Actual Total
per Month per Job for February
Revenue $276 $35,890
Technician wages $8,600 $8,450
Mobile lab operating expenses $4,600 $34 $9,200
Office expenses $2,800 $3 $3,070
Advertising expenses $1,580 $1,650
Insurance $2,890 $2,890
Miscellaneous expenses $930 $1 $375
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $34 per job, and the actual mobile lab operating expenses for February were $9,200. The company expected to work 140 jobs in February, but actually worked 150 jobs.
Required:
Complete the flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February.
Answer:
AirQual Test Corporation
Flexible Budget:
Fixed Variable Actual Flexible Variance
Revenue $276 $35,890 $41,400 ($5,510) U
Technician wages $8,600 $8,450 8,600 150 F
Mobile lab operating exp. $4,600 $34 $9,200 9,700 500 F
Office expenses $2,800 $3 $3,070 3,250 180 F
Advertising expenses $1,580 $1,650 1,580 (70) U
Insurance $2,890 $2,890 2,890 0 N/A
Miscellaneous expenses $930 $1 $375 1,080 705 F
Total $10,255 $14,300 $4,045 U
Explanation:
a) Data and Calculations:
Fixed Variable Actual
Revenue $276 $35,890
Technician wages $8,600 $8,450
Mobile lab operating exp. $4,600 $34 $9,200
Office expenses $2,800 $3 $3,070
Advertising expenses $1,580 $1,650
Insurance $2,890 $2,890
Miscellaneous expenses $930 $1 $375
Expected number of jobs to be worked = 140
Actual number of jobs worked = 150
Flexible costs:
Revenue = $276 * 150 = $41,400
Mobile lab operating expense:
Fixed element = $4,600
Variable element = $34 * 150 = $5,100
Total flexible budget = $9,700
Office Expenses:
Fixed element = $2,800
Variable element = $3 * 150 = $450
Total flexible budget = $3,250
Miscellaneous expenses:
Fixed element = $930
Variable element = $1 * 150 = $150
Total flexible budget = $1,080
Spending Variances:
Technician wages $8,600 $8,450 8,600 150 F
Advertising expenses $1,580 $1,650 1,580 (70) U
Insurance $2,890 $2,890 2,890 0 N/A
Spending variances = $80 F
Activity Variances:
Mobile lab operating exp. $4,600 $34 $9,200 9,700 500 F
Office expenses $2,800 $3 $3,070 3,250 180 F
Miscellaneous expenses $930 $1 $375 1,080 705 F
Total activity variances = $1,385 F
Camptown Togs, Inc., a children’s clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk so that the number of piece-goods coupons received by each employee can be collected and the types of tasks performed by each employee can be calculated. Not long ago, an industrial engineer designed a system that partially automates the process by means of a scanner that reads the piece-goods coupons. Management is enthusiastic about this system because it utilizes some personal computer systems that were purchased recently. It is expected that this new automated system will save $45,000 per year in labor. The new system will cost about $30,000 to build and test prior to operation. It is expected that operating costs, including income taxes, will be about $5,000 per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be $3,000.
(a) Identify the cash inflows over the life of the project.
(b) Identify the cash outflows over the life of the project.
(c) Determine the net cash flows over the life of the project.
Answer:
a. Time period Cash Inflow
Year 1 $45,000
Year 2 $45,000
Year 3 $45,000
Year 4 $45,000
Year 5 $48,000 ($45,000+$3,000)
b. Time period Cash Outflow
Year 0 $30,000
Year 1 $5,000
Year 2 $5,000
Year 3 $5,000
Year 4 $5,000
Year 5 $5,000
c. Time period Cash Inflow Cash Outflow Net Cash Flow
Year 0 $0 $30,000 -$30,000
Year 1 $45,000 $5,000 $40,000
Year 2 $45,000 $5,000 $40,000
Year 3 $45,000 $5,000 $40,000
Year 4 $45,000 $5,000 $40,000
Year 4 $48,000 $5,000 $43,000
The service-profit chain is designed to help managers better understand the key linkages in a service delivery system that drive customer loyalty, revenue growth, and higher profits.
a. True
b. False
If Cho's boss is interested in a graphical representation of the relationship between the price and quantity of televisions demanded, you would advise your coworker to construct_____________ using the data provided. However, if Cho's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that_________ would be more appropriate.
Answer:
supply curve
supply schedule
Explanation:
From the question, we are given an instance that If Cho's boss is interested in a graphical representation of the relationship between the price and quantity of televisions demanded, i would advise your coworker to construct supply curve using the data provided. However, if Cho's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that supply schedule would be more appropriate.
The supply curve can be regarded as
graphic representation that gives the
correlation between quantity supplied and cost of a good for a particular period of time.the left vertical axis con rain the price, the horizontal axis contains the quantity supplied .
Supply schedule can be regarded as table that gives the relationship between quantity supplied and the
price of a good
Diaz Company owns a milling machine that cost $126,500 and has accumulated depreciation of $92,700. Prepare the entry to record the disposal of the milling machine on January 3 under each of the following independent situations. The machine needed extensive repairs, and it was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $15,900 cash. Diaz sold the machine for $33,800 cash. Diaz sold the machine for $41,200 cash.
Answer:
A. Jan 03
Dr Accumulated depreciation—Milling machine $92,700
Dr Loss on disposal of milling machine $33,800
Cr Milling machine $126,500
B .Jan 03
Dr Cash $15,900
Dr Accumulated depreciation—Milling machine $92,700
Dr Loss on sale of milling machine $17,900
Cr Milling machine $126,500
C. Jan 03
Dr Cash $33,800
Dr Accumulated depreciation—Milling machine $92,700
Cr Milling machine $126,500
Explanation:
Preparation of journal entries
A. Jan 03
Dr Accumulated depreciation—Milling machine $92,700
Dr Loss on disposal of milling machine $33,800
($126,500-$92,700)
Cr Milling machine $126,500
B .Jan 03
Dr Cash $15,900
Dr Accumulated depreciation—Milling machine $92,700
Dr Loss on sale of milling machine $17,900
[126,500-($15,900+$92,700)
Cr Milling machine $126,500
C. Jan 03
Dr Cash $33,800
Dr Accumulated depreciation—Milling machine $92,700
Cr Milling machine $126,500
Which of the following best illustrates Hofstede's definition of collectivism?
a. Managers at Honest Tea expect that all employees will have an interest and part in environmental sustainability
b. The founder of Honest Tea stresses the importance of equality and opportunity
c. An employee of Honest Tea prefers to work alone and puts him- or herself above others
d. The managers of Honest Tea prefer tradition over change
e. Employees in Honest Tea have high levels of anxiety about uncertainty
Answer:
a. Managers at Honest Tea expect that all employees will have an interest and part in environmental sustainability
Explanation:
Analyzing the information about Honest Tea, it is possible to understand that sustainability is an issue that has a lot of weight for the company, and all its processes are managed in an environmentally responsible manner. Therefore, it is correct to say that Honest Tea managers expect all employees to be interested and participate in environmental sustainability, as this is a value that identifies and positions the company in the market, and it is essential that this value is shared by all employees.
Environmental management is a form of management that provides significant advantages to an organization, as it standardizes procedures and policies to reduce environmental impacts, the company operates with a focus on continuous improvement that reduces costs, waste, makes work most satisfactory and sustainability as a shared value.
1) Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 19%. Portfolio B has a beta of .6 and an expected return of 15%. The risk-free rate of return is 11%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio
Answer:
A, B.
Explanation:
E(r) = Rf + beta (Risk premium on factor)
PORTFOLIO A
19% = 11% + 1.7(RP)
19% - 11% = 1.7(RP)
(RP) = 0.08/1.7
(RP) = 0.047059
(RP) = 4.706%
PORTFOLIO B
15% = 11% + 0.6(RP)
15% - 11% = 0.6(RP)
(RP) = 0.04/0.6
(RP) = 0.06667
(RP) = 6.667%
As risk premium is lower in case of portfolio A, the correct strategy is Short Position in Portfolio A and Long Position in Portfolio B
A common error made when solving a future value of an annuity problem is: Multiple Choice Using factor tables to help solve the problem. Dividing the annual deposit by the number of years before calculating the problem. Using a financial calculator to help solve the problem. Multiplying the number of years and the interest rate before calculating the problem. Multiplying the annual deposit and the number of years before calculating the problem.
Answer:
Multiplying the annual deposit and the number of years before calculating the problem.
Explanation:
An annuity can be defined as a sequence of payment that is typically made at equal intervals i.e at specific period of time.
Basically, annuity can be calculated using the compound interest formula. It is given by the mathematical expression;
[tex] A = P(1 + \frac{r}{n})^{nt}[/tex]
Where;
A is the future value.
P is the principal or starting amount.
r is annual interest rate.
n is the number of times the interest is compounded in a year.
t is the number of years for the compound interest.
Additionally, the time period between each payment is called payment period.
The term of an annuity refers to the time from the beginning of the first payment made by an individual to the end of the last payment period.
A common error made when solving a future value of an annuity problem is multiplying the annual deposit and the number of years before calculating the problem.
Wildhorse Locomotive Corporation purchased for $604,000 a 40% interest in Lopez Railways, Inc. This investment enables Wildhorse Locomotive to exert significant influence over Lopez Railways. During the year, Lopez Railways earned net income of $159,000 and paid dividends of $27,000. Prepare ZaneLocomotive’s journal entries related to this investment.
Answer:
Dr Equity Investments $604,000
Cr Cash $604,000
Dr Equity Investments $63,600
Cr Investment Income $63,600
Dr Cash $10,800
Cr Equity Investments $10,800
Explanation:
Preparation of ZaneLocomotive’s journal entries related to this investment.
Dr Equity Investments $604,000
Cr Cash $604,000
(Being to record Investment)
Dr Equity Investments $63,600
Cr Investment Income $63,600
(40% × $159,000)
(Being to record share in net income)
Dr Cash $10,800
Cr Equity Investments $10,800
(40% × $27,000)
(Being to record shares in dividend)
1. A manager uses the following equation to predict monthly receipts: Y=450+10t time in weeks and y = receipts.) What is the forecast for July 14th if t=4 is the fourth week in January and t = 6 is February 14th of the same year (assume there are 4 weeks in each month)?
a. 690
b. 710
c. 730
d. 750
2. A major reason that decision making is often not such a rational process is that there are: Suppose we have H0:µ1= µ2 versus HA: µ1 ≠ µ2, with level of significance of α =.05 and critical values of zα/2 = ± 1.96, and the computed Test Statistics value of Z = -1.07. What is our decision?
Answer:
1. 690
2. Do not reject the null hypothesis.
Explanation:
1. Month t
At the end of Feb 6
March 4
April 4
May 4
June 2
14th of July 2
Total 24
Therefore on 14th July, t = 24
Forecast: Y = 450+10t = 450 + 10*24 = 450+240 = 690
2. Options are "a. Reject the null hypothesis. b. Do not reject the null hypothesis. c. Take a larger sample. d. Reserve judgment"
In general, if test statistic is more extreme than the critical values at given level of significance then we reject the null hypothesis otherwise we do not reject the null hypothesis.
Here, test statistic for the given two tailed test is Z = -1.07 and critical value at level of significance α = 0.5 is ± 1.96 . Since -1.96<Z<1.96, we can say that we do not reject Null Hypothesis as the test statistic is not extreme than the critical value at given level of significance.
By convention, a swap buyer on an interest rate swap agrees to act as the dealer in the swap agreement. hold both principal and interest to contract maturity. periodically pay a fixed rate of interest and receive a floating rate of interest. back both sides of the swap agreement. periodically pay a floating rate of interest and receive a fixed rate of interest.
Answer:
periodically pay a fixed rate of interest and receive a floating rate of interest.
Explanation:
The interest rate (rate of return) can be defined as the percentage of interest or dividends earned on money that is invested.
In Financial accounting, a return refers to the amount of profit generated by an investor on an investment over a specific period of time.
Basically, the interest rate which is typically expressed as a percentage of the initial costs of an investment can either be a gain or a loss on an investment. Therefore, a positive rate of return on an investment over a specific period of time, simply means that an investor is making a profit (gains) while a negative rate of return on an investment over a specific period of time, indicates that the investor is running at a loss.
By convention, a swap buyer on an interest rate swap agrees to periodically pay a fixed rate of interest and receive a floating rate of interest.
The Oxford Company uses a job order cost system and applies factory overhead to jobs on the basis of direct labor cost. During the month of July, the following activities took place in the work-in-process account:
Beginning $15,000
Direct materials 10,000
Direct labor 30,000
Overhead applied 15,000
 Â
At the end of July, only one job (Job #15), was still in process. This job has been charged with $2,000 of direct materials cost.
Required:
Determine the amount of direct labor cost incurred and overhead applied in the ending inventory of work-in-process on July 31.
Answer:
See below
Explanation:
The amount of direct labor cost incurred is computed as;
= $30,000/$70,000 × $2,000
= $857
Overhead applied in ending working in the ending inventory of work in process on July 31
= $15,000/$70,000 × $2,000
= $429
Match each of the following terms A through F with the appropriate definitions 1 through 6.
A. Maker of a note
B. Interest
C. Promissory note
D. Payee of a note
E. Principal of a note
F. Dishonoring a note _____
1. A written promise to pay a specified amount either on demand or at a definite future date. _____
2. The cost of borrowing money for a borrower, alternatively the profit from, lending money for a lender. _____
3. One who signs a note and promises to pay it at maturity. _____
4. The one to whom the promissory note is made payable. _____
5. Refers to a note maker's inability or refusal to pay the note at maturity. _____
6. The amount that the signer of a note agrees to pay back when the note matures, not including interest. Defining promissory notes.
Solution :
A. Maker of a note: 3. It is the person who signs the note and promises to pay.
The maker puts his signature and promises to pay the bearer the amount of the value of the note.
B. Interest: 2. It is the cost of borrowing money and profit for lender.
It is the extra money that the borrower pays to the lender. It is like an income to the lender.
C. Promissory note: 1. It is a promise to pay the signed sum.
It is a note that promises to pay the amount of the value.
D. Payee of a note: 5. It is the person to which the note is payable.
Payee is the individual who is the owner of the note.
E. Principal of a note: E. It is the amount signed to be paid back excluding interest.
It is the basic amount signed to be paid to the bearer.
F. Dishonoring a note: 5. It is inability to pay the signed sum.
Dishonoring is refusal to pay or the inability to pay the value for the signed amount.
M. K. Gallant is president of Kranbrack Corporation, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Gallant had predicted that the company’s earnings would grow by 20% this year. Unfortunately, sales have been less than expected for the year, and Gallant concluded within two weeks of the end of the fiscal year that it would be impossible to report an increase in earnings as large as predicted unless some drastic action was taken. Accordingly, Gallant has ordered that wherever possible, expenditures should be postponed to the new year—including canceling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of-year advertising and travel. Additionally, Gallant ordered the company’s controller to carefully scrutinize all costs that are currently classified as period costs and reclassify as many as possible as product costs. The company is expected to have substantial inventories at the end of the year.
1. Why would reclassifying period costs as product costs increase this period’s reported earnings?
2. Do you believe Gallant’s actions are ethical? Why or why not?