Answer:
Pelican Paper, Inc., and Timberland Forest, Inc.
Financial leverage and profitability Ratio Analysis
A. Computation of debt and coverage ratios:
1. debt ratio = Total debt to Total assets x 100
Pelican = $1,000,000/$10,000,000 x 100
= 10%
Timberland =v$5,000,000/$10,000,000 x 100
= 50%
2. times interest earned ratio = EBIT/Interests
Pelican = $6,250,000/$100,000
= 62.5 times
Timberland = $6,250,000/$500,000
= 12.5 times
A discussion of their financial risk and ability to cover the costs:
Pelican Paper's financial leverage is 10% compared to Timberland's 50%, showing that debt creditors finance and lay claim to half of the company's assets. This is very high and not attractive to potential investors and creditors. Timberland has already hampered its ability to borrow more as it is highly leveraged. Whereas Pelican Paper can meet its debt obligations and pay its interest expenses 62.5 times from current earnings, these pale in comparison with Timberland's 12.5 times, further jeopardizing its opportunities for more debt financing.
B. Calculation of the profitability ratios:
1. Operating profit margin = EBIT/Sales x 100
Pelican Paper = $6,250,000/$25,000,000 x 100 = 25%
Timberland = $6,250,000/$25,000,000 x 100 = 25%
2. Net profit margin = (EBIT less Interest)/Sales x 100
Pelican Paper = ($6,250,000 - $100,000)/$25,000,000 x 100
= $6,150,000/$25,000,000 x 100 = 24.6%
Timberland = ($6,250,000 - $500,000)/$25,000,000 x 100
= $5,750,000/$25,000,000 x 100 = 23%
3. Return on total assets = EBIT/Total Assets x 100
Pelican Paper = $6,250,000/$10,000,000 x 100
= 62.5%
Timberland = $6,250,000/$10,000,000 x 100
= 62.5%
4. Return on common equity = Earnings available to Common Stockholders/Equity x 100
Pelican = $3,690,000/$9,000,000 x 100
= 41%
Timberland = $3,450,000/$5,000,000 x 100
= 69%
A discussion of their profitability relative to one another:
The two companies make the same level of operating profit margin at 25%, but Pelican's net profit margin of 24.6% is better than Timberland's 23%. They show that Pelican's management has better ability to control expenses than Timberland's.
The returns on assets are similar for both companies, but Timberland performed better than Pelican Paper in terms of the return on equity. This shows that Timberland with ROE of 69% is making larger returns for its common stockholders than Pelican because it is leveraging debts, whose interests are tax-deductible, and also using less equity in generating the returns.
C. The larger debt of Timberland has made it more profitable than Pelican Paper because the debt interests are deductible from EBIT before tax expense is computed and it reduces the tax burden for the company, thus making it to pay less tax and saving more profits for distribution to its stockholders.
However, this higher return to the investors in Timberland also comes with higher risks, as the investors are exposed to debt risks, higher pressure to satisfy debt creditors, heightened interference and oversight from creditors since they own half of the assets of the company, and an increased threat of business takeover in case of debt default.
Explanation:
a) Data:
Items Pelican Paper, INC Timberland Forest, INC
Total assets $10,000,000 $10,000,000
Total equity 9,000,000 5,000,000
Total Debt 1,000,000 5,000,000
Annual Interest 100,000 500,000
Total Sales 25,000,000 25,000,000
EBIT 6,250,000 6,250,000
Earnings available for common
stockholders 3,690,000 3,450,000
b) Ratio computation and analysis help companies to compare their performances and positions with competitors. They can spot risks facing a company and even point out ways to address such business risks.
A _______ structure provides an organization with the most flexibility, but easier to operate. functional product matrix geographic product team
Answer:
product team.
Explanation:
A product team structure can be defined as a team whose main objectives are to develop problems and solutions for a product line.
This team is responsible for implementing strategic and marketing actions to ensure functionality, the inclusion of benefits and acceptance of the product in the market, therefore it must be formed by trained professionals with a strategic vision aligned with the organizational values and objectives.
This type of team structure allows greater flexibility in the work, due to the fact that it is carried out by a multifunctional team where there is the possibility of sharing innovative ideas for the success in the development of a product.
Xia Co. manufactures a single product. All raw materials used are traceable to specific units of product. Current information for company follows: Beginning raw materials inventory $ 22,000 Ending raw materials inventory 25,000 Raw material purchases 99,000 Beginning work in process inventory 34,000 Ending work in process inventory 44,000 Direct labor 124,000 Total factory overhead 99,000 Beginning finished goods inventory 74,000 Ending finished goods inventory 54,000 The company's cost of direct materials used, cost of goods manufactured and cost of goods sold is:
Answer:
Instructions are below.
Explanation:
First, we need to calculate the direct material used in production:
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 22,000 + 99,000 - 25,000
Direct material used= $96,000
Now, we can determine the cost of goods manufactured:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 34,000 + 96,000 + 124,000 + 99,000 - 44,000
cost of goods manufactured= $309,000
Finally, the cost of goods sold:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 74,000 + 309,000 - 54,000
COGS= $329,000
The ideal marketing objective is ________. idealistic, quantifiable, and consumer-oriented situational, unattainable, and internal time specific, realistic, and quantifiable realistic, qualitative, and competitive quantifiable, research-based, and without regard to ethics
Answer:
The correct answer is: Time specific, realistic and quantifiable.
Explanation:
To begin with, a good marketing campaign must follow certain objectives in order to be fully successfull or at least as high as possible. Therefore that the best objectives to look for regarding marketing expertises are the facts that the objectives are realistic, so that means that it can be possible done by the budget of the company; quantifiable, so that means that the company can measure the benefits of using the campaign and see that the costs were worthy; and finally, time specific objectives, so that means that the company can know if their goals are being accomplished in the time expected.
First, spend a couple of sentences summarizing the Concepts in Action video you watched this week. Then, answer the following. In the Concepts in Action video you watched this week, the speaker mention that for a small business, having payment terms is like using "free money" for a while. What do you think this means
Answer with its Explanation:
Free Money means the money that has to be paid back to the money lender within a reasonable time. The money lender usually is a trader who sells his product at credit allowing his customer a reasonable period to payback. Furthermore, the free money is termed free because they are interest free lendings.
In real life, free money is can be availed by purchasing products from the suppliers if you are acting as a middle man in the distribution channel or you are a small customer and your borrowings doesn't impact the supplier. Almost all of the businesses lend free money in the form of products because allowing credit increases the sales of the organizations.
Travers Company is contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units (the total capacity of their factory). Travers Company is presently manufacturing 7000 units in their factory.
Direct Materials $5
Direct Labor $10
Variable Overhead $7
Fixed Overhead $6
Poppins Company wants to purchase 2,000 units at a special unit price of $36. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $6250 in order to stamp the company’s logo on the product.
Required:
What is the amount of the incremental income (loss) from accepting the order?
Answer:
The amount of the incremental income from accepting the order is $21,750 .
Explanation:
Incremental analysis of Accepting Special Order
Hint : Consider Incremental Amounts Only
Sales (2,000 units × $36) $72,000
Less Expenses
Direct Materials ($5 × 2,000) ($10,000)
Direct Labor ($10 × 2,000) ($20,000)
Variable Overhead ($7 × 2,000) ($14,000)
Special stamping machine ($6250)
Incremental income/ (loss) $21,750
Note : There is excess capacity of 3,000 units (10,000 units - 7,000 units) to meet the Special Order. Hence
Fixed Overheads will be the same whether or not the special order is accepted, hence they are not included in the analysis.
Conclusion :
The amount of the incremental income from accepting the order is $21,750 .
Which one of the following categories provides a common approach and frame of reference for conducting project management activities within an organization?
a. Business alignment
b. Resource integration
c. Technical support
d. Practice management
Answer:
The correct answer is the option A: Business alignment.
Explanation:
To begin with, the concept known as "Business Alignment" refers to the process by which the managers of a company tend to use the information technology in order to obtain certain business objectives inside the organization that are the goals that they looked for. In addition, this process sometimes tend to focus more on the financial improvement of the company as well as its marketplace competitiveness. Therefore that this type of term gives a good approach and frame of reference for the managers who are looking for conduct project management activities inside the company.
Which type of business is likely to have purchasing activities related primarily to consumable goods rather than products that will later be resold to consumers?
A. Printing business
B. Service oriented business
C. Retail business
D. Manufacturing business
Answer:
B. Service oriented business
Which type of business is likely to have purchasing activities related primarily to consumable goods rather than products that will later be re-sold to customers? Answer is service oriented business
Explanation:
Hope it helps! If you dont mind can you please mark me as brainlest?
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 30,400 Total fixed manufacturing overhead cost $ 425,600 Variable manufacturing overhead per machine-hour $ 5.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 20 Direct materials $ 590 Direct labor cost $ 1,180 The amount of overhead applied to Job T687 is closest to:
Answer:
The amount of overhead applied to Job T687 is closest to: $280.
Explanation:
Predetermined rate = Budgeted Overheads / Budget Activity
= $ 425,600 / 30,400
= $14.00 per machine-hour
Applied overheads to job T687 = Predetermined rate × Actual machine hours used
= $14.00 × 20
= $280
Conclusion :
The amount of overhead applied to Job T687 is closest to: $280.
A country in South America is experiencing high inflation, around 15% annually, and high unemployment, around 25%. According to the AD/AS model, which of the following is most likely to explain this outcome?
a. A positive real shock
b. A positive aggregate demand shock
c. A negative aggregate demand shock
d. A negative real shock
Answer:
The correct answer is the option D: A negative real shock
Explanation:
To begin with, in the case presented where the economy has suffered from high inflation and unemployment rates then the most likely situation that could have happened before to explain this outcome is that the country and its economy were harmed badly by a negative real shock. This tend to happen when the aggregate supply is low and this one tends to decline rapidly affecting the economy in its whole due to the fact that the sellers are now producing less of the products and services and therefore the consumption and the real GDP decreases dramastically.
Schedule of Cash Collections of Accounts Receivable OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 25% pay their accounts in the month of sale, while the remaining 75% pay their accounts in the month following the month of sale. Projected sales for the next three months are as follows: October $133,000 November 166,000 December 243,000 The Accounts Receivable balance on September 30 was $89,000. Prepare a schedule of cash collections from sales for October, November, and December. Round all calculations to the nearest whole dollar.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Sales:
30% on cash
70% on account
Sales on account:
25% in the month of the sale
75% in the following month
October $133,000
November 166,000
December 243,000
The Accounts Receivable balance on September 30 was $89,000.
Cash collection October:
Sales on cash= 133,000*0.30= 39,900
Sales on account from October= (133,000*0.7)*0.25= 23,275
Sales on account September= 89,000
Total cash collection= $152,175
Cash collection November:
Sales on cash= 166,000*0.30= 49,800
Sales on account from October= (166,000*0.7)*0.25= 29,050
Sales on account October= (133,000*0.7)*0.75= 69,825
Total cash collection= $148,675
Cash collection December:
Sales on cash= 243,000*0.30= 72,900
Sales on account from October= (243,000*0.7)*0.25= 42,525
Sales on account October= (166,000*0.7)*0.75= 87,150
Total cash collection= $202,575
Ivanhoe provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,500 per month Advertising $350 per month Insurance $2,770 per month Weed and feed materials $17 per lawn Direct labor $9 per lawn Fuel $2 per lawn Ivanhoe charges $70 per treatment for the average single-family lawn. Correct answer. Your answer is correct. Determine the company’s break-even point in number of lawns serviced per month. Break-even point Entry field with correct answer 110 lawns LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Determine the company’s break-even point in dollars.
Answer:
Explanation:
To start with, we need to get the value for total fixed cost and total variable cost
Total fixed costs = Depreciation + Advertising + Insurance
= $1,500 + $350 + $2,770
= $4,620
Total variable costs per unit = Weed and feed materials + Direct labor + Lawn Fuel
= $17 + $9 + $2
= $28 per lawn
We also need to compute the contribution margin ratio
= Sales per unit - Variable cost per unit / Sales per unit
= (70 - 28) / 70
= 0.6
= 60%
Therefore;
1. Break even sales
A sporting goods store purchased $10,150 worth of ski boots in October. The store had $4,350 of ski boots in inventory at the beginning of October and expects to have $3,800 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October
Answer:
The budgeted cost of goods sold for October is $9,600.
Explanation:
Prepare a Budgeted Costs of Goods Sold for October as follows :
Budget Purchases $10,150
Add Budgeted Closing Stock $3,800
Needed $13,950
Less Budgeted Opening Stock ($4,350)
Budgeted Cost of Goods Sold $9,600
Conclusion :
The budgeted cost of goods sold for October is $9,600.
Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $86,000 with a $7,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $15,810 per year. In addition, the equipment will have operating and energy costs of $4,190 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.
Answer:
130.77%
Explanation:
depreciation expense per year using straight method = (purchase cost - salvage value) / useful life = ($86,000 - $7,000) / 10 = $7,900
total costs = depreciation expense + operating and energy costs = $7,900 + $4,190 = $12,090
average rate of return = total savings / total costs = $15,810 / $12,090 = 1.30769 = 130.77%
Fisher meeting with Bill Gates, CEO - Microsoft, to form alliances to develop new photo software that helped customers manipulate images, was an example of -
Answer: External horizontal diversification
Explanation:
External horizontal diversification is when new products or services are added to a company because they may appeal to the customers. This is a strategy that is used to increase the dependence of firm on certain segments of the market.
This was used when Fisher met with Bill Gates, CEO - Microsoft, to form alliances to develop new photo software that helped customers manipulate images.
Process costing typically uses only one Work in Process Inventory account, while job order costing typically uses a separate Work in Process Inventory account for each department.
a. True
b. False
Answer:
False.
Explanation:
Process costing typically uses only one Work in Process Inventory account, while job order costing typically uses a separate Work in Process Inventory account for each department. This is simply a false statement.
Process costing can be defined as a cost accounting method used for assigning manufacturing or production costs to the units of goods produced by a business firm over a specific period of time. It is mostly used by firms that produce a large quantity of homogeneous or similar products on a continuous basis. Process costing typically uses more than one Work in Process Inventory account because costing at each stage of production or manufacturing process.
Job order costing can be defined as a cost accounting method used to determine and accumulation of the cost of manufacturing each product or a single unit of production. Job costing order typically uses only one Work in Process Inventory account for each product.
In conclusion, Process costing typically uses a separate Work in Process Inventory account for each department while job order costing typically uses only one Work in Process Inventory account for each product.
Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida and wants to expand to other states. During 2019, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations but not the outlets in Georgia. As to these expenses, Iris should: a.Expense $9,000 for 2019 and capitalize $14,000. b.Expense $23,000 for 2019. c.Capitalize $23,000. d.Capitalize $14,000 and not deduct $9,000. e.None of these choices are correct.
Answer:
b.Expense $23,000 for 2019.
Explanation:
The computation is shown below:
= Spend in the investigation for the TV rental stores in South Carolina + Spend in the investigation for the TV rental stores in Georgia
= $14,000 + $9,000
= $23,000
Hence, the amount of expense $23.000 would be considered
Therefore the option b is correct
The online retailer Lands' End communicates a remarkable commitment to its ________ with these unconditional words: "We accept any return, for any reason. Guaranteed Period."
Answer:
Customers
Explanation:
By making such statements the online retailer is trying to build trust with customers. And to satisfy their purchase experience about the value they will derive from the product. It is a good marketing strategy employed by some businesses today.
International franchising is
International franchising is a business model that expands the franchising concept into the international marketplace. For example, you can use the rental car concept as a prime example. You can expand the concept of renting a car from a domestic market to an international market.
Roll over each item on the left to read the description. Identify whether each of the statements is an argument for or an argument against a specific exchange rate regime, then place each item in the correct place on the chart.
2/5 points awarded Government adjusts Fluctuation with limits Scored Reduces uncertainty Argument for Argument Against Market-based Floating exchange rate Uncertainty Market-based Unknown elements Continual government intervention Fixed exchange rate No uncertainty Continual government intervention Managed-float Difficult Fluctuation with limits Difficult Pegged exchange rate Limited options Government adjusts Limited options Target Zone Reduces uncertainty Unknown elements No uncertainty
Answer:
Floating exchange rate
Here the market decides the value of the currency as it trade freely in the market based on supply and demand.
Argument For;
Market Based - It is market based therefore it reflects the true value of the currency.
Argument Against;
Uncertainty - As it trades according to the whims of supply and demand, telling which direction it will go in terms of value is a difficult undertaking therefore financial decisions based on such are riskier.
Fixed exchange rate
Here the value of the currency is fixed either to the value of another currency or to the price of gold.
Argument For;
No Uncertainty - As the currency is tied to another currency which is usually more stable or gold, the rate of the currency is more predictable.
Argument Against;
Unknown Elements
Managed float
In this exchange rate regime, the Central bank of a country intervenes in the Foreign exchange market to push or pull the currency in the direction that it prefers.
Argument For;
Government intervention - The Government Intervention ensures that the currency's value remains stable as well as allowing the Central bank to maintain a good balance of payments.
Argument Against;
Difficult - Maintaining the currency within the band preferred in a difficult undertaking that requires constant intervention in the Forex market.
Pegged exchange rate
The Central bank in this instance pegs the currency to a basket of currencies after setting an exchange rate it would prefer and then intervenes in forex market to keep it that way.
Argument For;
Reduces uncertainty - The movement of the currency is more predictable due to it being pegged to a basket of currencies.
Argument Against;
Continual government intervention - As this requires the currency to remain at a certain value, the government will keep intervening to ensure that it stays at that exact level.
Target zone
Here the Central Bank allows the currency to fluctuate on the market albeit with limits placed on how much it can do so.
Argument For;
Fluctuation with limits - By combining fixed regimes with floating regimes, the currency can maintain a semblance of true value whilst still be less uncertain.
Argument Against;
Limited options.
Floating exchange rate
Here the market determines the value of the currency as it trades willingly in the market based on supply and demand.
What are Supply and Demand?
Argument For;
Market-Based - It is market-based thus it reflects the true value of the currency.
Argument Against;
Uncertainty - As it trades according to the impulses of supply and demand, suggesting which direction it will go in terms of significance is a difficult undertaking therefore financial decisions based on such are riskier.
Fixed exchange rate
Here when the value of the currency is fixed either to the value of another currency or to the price of gold.
Argument For;
No Uncertainty - As the currency is tied to another currency which is usually additional stable or gold when the rate of the currency is more predictable.
Argument Against;
Unexplored Elements
Managed float
In this interaction rate regime, when the Central bank of a country intervenes in the Foreign exchange market to push or pull the currency in the direction that it prefers.
Argument For;
Government intervention - When The Government Intervention ensures that the currency's value stays stable as well as allows the Central bank to maintain a good balance of payments.
Argument Against;
Difficult - When the Maintaining the currency within the band is preferred in a difficult undertaking that is required constant intervention in the Forex market.
Pegged exchange rate
The Central bank in this instance pegs the currency to a basket of currencies after setting an interaction rate it would prefer and also then intervenes in the forex market to keep it that way.
Argument For;
Reduces uncertainty - When The movement of the currency is more predictable due to it being pegged to a basket of currencies.
Argument Against;
Continual government intervention - Now, As this requires the currency to remain at a certain value, the government will keep intervening to ensure that it stays at that exact level.
Target zone
When Here the Central Bank allows the currency to fluctuate on the market albeit with limits placed on how much it can do so.
Argument For;
Fluctuation with limits - By combining improved regimes with floating regimes, the currency can maintain a semblance of true value whilst still being less uncertain.
Argument Against;
Limited choices.
Find more information about Supply and Demand here:
https://brainly.com/question/6702244
Powell Company issued a $1,200,000, 7 %, 10-year bond payable at face value on January 1, 2018. Interest is paid semiannually on January 1 and July 1.
Requirements
1. Journalize the issuance of the bond payable on January 1, 2018.
2. Journalize the payment of semiannual interest on July 1, 2018.
Answer:
1.Dr Cash 1,200,000
Cr Bonds Payable 1,200,000
2. Dr Interest Expense 42,000
Cr Cash 42,000
Explanation:
1. Preparation of the Journal entry to record the issuance of the bond payable on January 1, 2018.
Since the company issued the amount of $1,200,000 this means that the transaction will be recorded as:
January 1 2018
Dr Cash 1,200,000
Cr Bonds Payable 1,200,000
( To record Issued bonds at par)
2. Preparation of the Journal entry to record the payment of semiannual interest on July 1, 2018.
Since the company issued the amount of $1,200,000 with 7 %, and 10-year bond payable at face value, this means the transaction will be recorded as;
July 1 2018
Dr Interest Expense 42,000
Cr Cash 42,000
($1,200,000 × 0.07 × 6/12)
(To record paid semiannual interest payment)
Your goal as a speaker is to help your audience understand, remember, and act upon your ideas. To improve comprehension and enhance retention, use visual aids.
1.Well-planned visual aids can _________________ and make the presenter appear more professional.
a) increased audience interest
b) decrease interruptions
2.What is an advantage of using multimedia slides?
a) They enhance recall because the audience keeps the reference material.
b) They are always compatible with other equipment and programs.
c) They are inexpensive to update and easy to use and transport.
3.What visual aid conveys a professional appearance by allowing the presenter to choose from many color, art, and font options?
a) Handouts
b) Speaker notes
c) Multimedia slides
Read the scenario, and answer the question.
You are giving a presentation on designing multimedia presentations. You will have access to compatible A/V equipment, and you know that each of your listeners will probably want a copy of the key tips in your presentation.
4.What visual aid option should you choose? Check all that apply.
a) Flip charts
b) Props
c) Transparencies
d) Handouts
e) Multimedia slides
Answer:
1. A
2. A
3. C
4. D and E.
Explanation:
1. Well-planned visual aids can increased audience interest and make the presenter appear more professional.
2. An advantage of using multimedia slides is that they enhance recall because the audience keeps the reference material.
3. Multimedia slides is a visual aid conveys a professional appearance by allowing the presenter to choose from many color, art, and font options.
4. Multimedia slides and handouts is a visual aid option that allows access to compatible A/V equipment, and each of the listeners can have a copy of the key tips in the presentation.
Generally, in order to have good communication and for the sake of impacting knowledge, speakers should help their audience understand, remember, and act upon ideas. Also, to improve comprehension and enhance retention, speakers are advised to use visual aids such as a multimedia slide, handouts etc. A multimedia slide can be designed or created through the use of a computer software such as Microsoft PowerPoint.
Additionally, the handouts should be shared to the audience at the end of the presentation.
Answer:
everything besides B
Explanation:
Yarim corporation produces and sells 6500 units per month of a single product for a price of $170 per unit variable costs are $24 per unit and monthly fixed costs are $120 per unit.
Per Unit Percent of Sales
Selling price $180 100%
Variable expenses 54 30%
Contribution margin $126 70%
The company is currently selling 5,500 units per month. Fixed expenses are $383,300 per month. The marketing manager believes that a $6,500 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?
A. Decrease of $6,500.
B. Increase of $4,700.
C. Increase of $11,200.
D. Decrease of $4,700.
Answer:
Effect on income= $11,140 increase
Explanation:
Giving the following information:
Contribution margin $126
The marketing manager believes that a $6,500 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales.
To calculate the effect on income, we need to use the following formula:
Effect on income= total contribution margin increase - fixed costs increase
Effect on income= 140*126 - 6,500
Effect on income= $11,140 increase
Compute the payback for each of these two seperate investments:
a. A new operating system for an existing machine is expected to cost $250000 and have a useful life of 6 years. The system yields an incremental after-tax income of $72115 each year after deducting its straight line depreciation. The predicted salvage value of the system is $10000.
b. A machine costs $200,000, has a $13,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation.
Answer:
a. 2.23
b. 3.21
Explanation:
a. Answer to Part A
Payback Period = Investment / Annual Cash Inflow
= 250000 / 112115
= 2.23
Answer to Part B
Payback Period = Investment / Annual Cash Inflow
= 200000 / 62375
= 3.21
Working Note
Particulars Case A Case B
After Tax Income 72115 39000
Add: Depreciation 40000 23375
Cash Inflow 11,2115 62375
Particulars Case A Case B
Cost of Machine 250000 200000
Less: salvage Value 10000 13000
Depreciable Value 240000 187000
Life of the Asset 6 8
Annual Depreciation 40000 23375
Consider a fast food café of your choice. Apply 4 V’s of Operation. Describe each V as ‘High’, ‘Low’ or ‘Moderate’ with one liner reason.
Answer:
4 V's of Operation
The 4 V's of operation are Volume, Variety, Variation, and Visibility. Let us take Mrs. Happy Food Cafe with over 100 outlets in Fiacton Town, as an example to illustrate the 4 V's of operation.
Volume: As a food cafe, the volume of production that will be required for some foods and drinks is so high that their provision requires repetitive tasks. Based on this, procedures are normally standardized in order to achieve low cost for foods and drinks. However, it is harder to standardize services, since personal touches are added by the servers based on their individual perceptions and abilities.
Variety: Mrs. Happy Food Cafe tries to bring some variety in her offerings to satisfy the various needs of her customers. While variety is naturally low in the Food Cafe sector, some cafes like Mrs. Happy Good Cafe, try to satisfy customers' demands by varying the foods with Continental, African, Latino cuisines and dishes.
Variation: At Mrs Happy Food cafes, the food and drinks do not vary much as customers expect to be served the same quality of services at any of their cafes. This is because the processes are standardized to achieve low cost. So, the variation is moderate.
Visibility: Customers of Mrs Happy Food cafes are not able to see and track their experiences of the the processes for the food preparation that they order. But, they can track the processes for the services because services are consumed as they are offered. So, visibility is 'Moderate," as it is divided between the hard goods and the soft goods. With respect to goods visibility is 'Low.' However, with respect to the services the customers' visibility of processes is high.
Explanation:
The 4 V's of operation describe the different characteristics of the processes that various entities use to transform their inputs into outputs of goods and services. They may be high, low, or moderate. They include, volume, variety, variation, and visibility.
Hermes International produces a Kelly handbag, named for the late actress Grace Kelly. Craftsmen stitch the majority of each $7,000 bag by hand and sign it when they finish. This is an example of _____ production.
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of a meeker is $23. Suppose that the world price for a meeker is $24. Assume that Meekertown is too small to influence the world price for meekers once they enter meeker the international market. If Meekertown allows free trade, then it will _______________ meeker.
When a country is too small affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.
a. True
b. False
Answer:
Export
true
Explanation:
Because the price of meekers in meekertown is lower than the world price for meekers, meekers from meekertown are cheaper. so if free trade is allowed, other countries would want to purchase meekers from meekertown because it is cheaper.
So, meekertown would export meekers if free trade is allowed.
When a country is too small affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.
this is so because if the country is efficient in production of a good (producing at a lower price when compared to the world price), export of the good would increase thus increasing producer surplus. if on the other hand, the country is inefficient in producing a good and the country allows for free trade, the country can import the good. this would increase consumer surplus.
Kite Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $ 180,000 Variable expenses 108,000 Contribution margin 72,000 Fixed expenses 62,400 Net operating income $ 9,600 The contribution margin ratio is closest to:
Answer:
40%
Explanation:
Contribution margin = Contribution ÷ Sales × 100
= 72,000 ÷ $180,000 × 100
= 0.4 × 100
= 40%
Please not that other information given in the question are not relevant in arriving at the contribution margin ratio hence will be ignored.
The Park Avenue Corporation currently makes a part required in its finished product. The company uses 2,116 units of this part annually. Park Avenue Corp has been approached by a vendor to provide this part for $13.04 each. The following cost information is provided
Direct Materials per unit $6.34
Direct Labor per unit $7.30
Variable Factory Overhead per unit $2.50
Fixed Factory Overhead per unit $7.50
How much would Park Avenue Corporation save by having the vendor make the part, instead of making it themselves?
Answer:
If the company buys the part, it will save $$6,559.6
Explanation:
Giving the following information:
Purchase price= $13.04
The company uses 2,116 units of this part annually.
Production:
Direct Materials per unit $6.34
Direct Labor per unit $7.30
Variable Factory Overhead per unit $2.50
We weren't provided with information regarding the fixed costs. I will assume that non of the fixed overhead costs are avoidable, therefore, they are irrelevant to the decision making process.
Buy:
Total cost= 2,116*13.04= $27,592.64
Production:
Total cost= 2,116*(6.34 + 7.3 + 2.5)= $34,152.24
If the company buys the part, it will save $$6,559.6
In the case when the company buys the part, it will save $6,559.6.
Calculation of the value of part:Since
Purchase price= $13.04
Direct Materials per unit $6.34
Direct Labor per unit $7.30
Variable Factory Overhead per unit $2.50
Now
For Buy:
Total cost= 2,116*13.04= $27,592.64
For Production:
Total cost= 2,116*(6.34 + 7.3 + 2.5)= $34,152.24
So, we can say that In the case when the company buys the part, it will save $6,559.6.
Learn more about material here: https://brainly.com/question/24555844
Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 103 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually. a. What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 21 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
Viserion, Inc.
Cost of debt:
Premium on Debt = 3% (103 - 100%)
Amortization of the premium = 3%/23 = 0.13%
Interest cost = 6%
Cost of debt (pretax) = 6% - 0.13% = 5.87%
Explanation:
The cost of debt is the difference between the interest expense in percentage that Viserion, Inc. pays annually and the premium on the debt that must be amortized over the life of the debt. Since Viserion, Inc. pays 6% annually or 3% semiannually on the debt and amortizes 0.13% of the debt premium, the amortization rate is taken away from the annual interest to get the cost of debts in percentage terms.
Financial Statements of a Manufacturing Firm
The following events took place for Focault Inc. during July 20Y2, the first month of operations as a producer of road bikes:
Purchased $320,000 of materials
Used $275,000 of direct materials in production
Incurred $236,000 of direct labor wages
Applied factory overhead at a rate of 75% of direct labor cost
Transferred $652,000 of work in process to finished goods
Sold goods with a cost of $630,000
Sold goods for $1,120,000
Incurred $252,800 of selling expenses
Incurred $100,000 of administrative expenses
A. Prepare the July income statement for Focault. Assume that Focault uses the perpetual inventory method.
Focault Inc.
Income Statement
For the Month Ended July 31
Revenues $
Cost of Goods Sold
Gross Profit $
Selling and administrative expenses:
Selling Expenses $
Administrative Expenses
Total selling and administrative expenses
Income from Operations $
B. Determine the inventory balances at the end of the first month of operations.
Materials inventory, July 31
Work in process inventory, July 31
Finished goods inventory, July 31
Answer:
Required A.
Focault Inc.
Income Statement For the Month Ended July 31
Revenues $1,120,000
Cost of Goods Sold ($630,000)
Gross Profit $ 490,000
Selling and administrative expenses:
Selling Expenses ($252,800)
Administrative Expenses ($100,000)
Income from Operations $137,2000
Required B
Materials inventory, July 31 = $45,000
Work in process inventory, July 31 = $36,000
Finished goods inventory, July 31 = $22,000
Explanation:
Raw Materials T - Account
Debit :
Purchases $320,000
Totals $320,000
Credit:
Used in Production $275,000
Ending Balance $45,000
Totals $320,000
Manufacturing Cost Schedule
Raw Materials $275,000
Direct labor $236,000
Overheads ($236,000 × 75%) $177,000
Total Manufacturing Cost $688,000
Less Cost Transferred to Finished Goods ($652,000)
Ending Work In Process $36,000
Finished Goods T - Account
Debit :
Cost of Goods Manufactured $652,000
Totals $652,000
Credit :
Trading Account : Cost of Sales ($630,000)
Ending Balance $22,000
Totals $652,000