Answer:
-$51,566.
Explanation:
So, we are given the following parameters in the question above;
Cost of equipment = $1.2 million, pre-tax cost of borrowed funds = 8 percent, tax rate = 32 percent and the equipment can be leased for = $242,500 a year.
Step one : Calculate the After-Tax lease payment .
The After-Tax lease payment = ($242,500) × (1 - 0.32) = $164,900.
Step two: Calculate the Annual Depreciation Tax-Shield.
Annual Depreciation Tax-Shield = ($1,200,000/7) × (0.32) = $54,857.
Step three: Calculate the After-Tax Discount Rate.
The After-Tax Discount Rate = 0.08 × (1 - 0.32) = 5.44%.
Step four: Calculate the Net Advantage to Leasing.
The Net Advantage to Leasing = $1,200,000 - ($164,900 + $54,857.14) × (PVIFA 5.44%, 7).
= -$51,566
Ritchie Manufacturing Company makes a product that it sells for $200 per unit. The company incurs variable manufacturing costs of $110 per unit. Variable selling expenses are $20 per unit, annual fixed manufacturing costs are $466,000, and fixed selling and administrative costs are $269,000 per year.
Required:
Determine the break-even point in units and dollars using each of the following approaches:
a. Use the equation method.
b. Use the contribution margin per unit approach.
c. Use the contribution margin ratio approach.
d. Prepare a contribution margin income statement for the break-even sales volume.
Answer :
Break even units = 10,500
Break even amount = $2,100,000
Explanation :
As per the data given in the question,
a) Break even units = Fixed expense ÷ CM per unit b ÷ (a - c)
= ($466,000 + $269,000) ÷ ($200 - $110 - $20)
= 10,500 units
b) Break even amount = b ÷ (a ÷ c)
= ($466,000 + $269,000) ÷ ($70 ÷ $200)
= $2,100,000
Contribution margin ratio = Contribution margin ÷ Selling price per unit × 100
where,
Contribution margin = Selling price per unit - variable expenses per unit
c) CM per unit Break even units = Fixed expense ÷ Cm per unit
= $735,000 ÷ $70
= 10,500 units
Break even dollars = Fixed expense ÷ Contribution margin ratio
= $735,000 ÷ 0.35
= $2,100,000
d) Contribution margin income statement:
Sales = 10,500 × $200 = $2,100,000
Less Variable expenses 10,500 × ($110+$20) = $1,365,000
Contribution margin $735,000
Less Fixed Expense $735,000
Net Operating Income = $0
Final answer:
The break-even point for Ritchie Manufacturing Company is 10,500 units or $2,100,000 in revenue. This can be calculated using the equation method, contribution margin per unit, or contribution margin ratio approaches. A contribution margin income statement at the break-even level would show $2,100,000 in sales, with total costs also amounting to $2,100,000, resulting in $0 operating income.
Explanation:
To determine the break-even point in units and dollars for Ritchie Manufacturing Company, we can use the following information: selling price per unit is $200, variable costs per unit are $110 (manufacturing) + $20 (selling), fixed manufacturing costs are $466,000, and fixed selling and administrative costs are $269,000.
a. Equation method: The break-even point in units (Q) is found by solving the equation for Q in $200Q = $110Q + $20Q + $466,000 + $269,000. Simplifying this, we get $200Q = $130Q + $735,000, which gives us Q = $735,000 / ($200 - $130) = $735,000 / $70 = 10,500 units. The break-even point in dollars is therefore 10,500 units * $200/unit = $2,100,000.
b. Contribution margin per unit approach: The contribution margin per unit is $200 (selling price) - $110 (variable manufacturing cost) - $20 (variable selling expense) = $70. Therefore, the break-even point in units is the total fixed costs divided by the contribution margin per unit, which is ($466,000 + $269,000) / $70 = $735,000 / $70 = 10,500 units. To find the break-even point in dollars, multiply the units by the selling price: 10,500 units * $200 = $2,100,000.
c. Contribution margin ratio approach: The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $70 / $200 = 0.35, or 35%. The break-even point in dollars can be found by dividing the total fixed costs by the contribution margin ratio $735,000 / 0.35 = $2,100,000.
d. Contribution margin income statement: At the break-even sales volume of 10,500 units, the contribution margin income statement would show $2,100,000 in sales, $1,155,000 in variable costs ($110 manufacturing + $20 selling, multiplied by 10,500 units), resulting in a contribution margin of $945,000, which exactly covers the fixed costs of $735,000 ($466,000 manufacturing + $269,000 administrative), leading to an operating income of $0.
Hal and Gavin are siblings who own a mattress recycling company. Demand has been increasing for their services and the brothers are contemplating whether to open up an additional mattress drop off site in the downtown area. They estimate it would add $1 million in expenses with their profit increasing by $150 thousand each year for the next 5 years (all other things equal).
Required:
1. Hal and Gavin decide __________.
O to open a mattress drop off site downtown because the marginal cost of the new location is less than other similar projects.
O to not open a mattress drop off site downtown because the marginal costs prove to be too high.
O to open a mattress drop off site downtown because the expected marginal benefit is greater than the estimated marginal cost.
Hal and Gavin's decision against opening a new location lies in their projected financial loss. Although they could increase profits by $150,000 annually, the $1 million upfront cost would generate a net loss over five years as the anticipated profit ($750,000) is less than the estimated expenses.
Explanation:Hal and Gavin decide to not open a mattress drop off site downtown because the marginal costs prove to be too high. Here's why: they anticipate the new location would increase their expenses by $1 million, while only raising their profits by $150 thousand each year over the next five years. This means, over a five-year period, their profits would only amount to $750 thousand (5 years x $150 thousand per year), which is $250 thousand less than their estimated costs, indicating a net loss. Hence, the marginal cost to open up a new location (the additional $1 million) is greater than the marginal benefits (the added $750 thousand of profit).
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Year-to-date, Yum Brands had earned a 4.40 percent return. During the same time period, Raytheon earned 4.93 percent and Coca-Cola earned −0.60 percent.If you have a portfolio made up of 40 percent Yum Brands, 40 percent Raytheon, and 20 percent Coca-Cola, what is your portfolio return?
Answer:
3.612%
Explanation:
The computation of portfolio return is shown below:-
Portfolio return = (Return of Y × Weight of Y) + (Return of R × Weight of R)
+ (Return of C × Weight of C)
= (4.40% × 40%) + (4.93% × 40%) + (-0.60% × 40%)
= 1.76% + 1.972% - 0.12%
= 3.612%
Therefore for computing the portfolio return we simply applied the above formula.
A company that produces a single product has a net operating income of $80,000 using variable costing and a net operating income of $104,750 using absorption costing. Total fixed manufacturing overhead was $53,550 and production was 10,500 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)
a. increased by 4,853 units
b. decreased by 4,853 units
c. increased by 24,750 units
d. decreased by 24.750 units
Answer:
The correct option is A,increased by 4,853 units
Explanation:
The fact that profit under absorption costing is higher than profit under variable costing implies that some items of inventory under absorption costing had fixed cost included in them,which was expensed under variable costing method as period cost.In other words,closing inventory has increased.
The increase can be computed thus:
=absorption costing profit-variable costing profit/fixed cost per unit
fixed cost per unit=total fixed cost/units of output=$53,550/10,500=$5.1
increase in inventory=($104,750-$80,000)/$5.1=4853 units
The difference between the two profits figure is the fixed cost added to closing inventory under absorption costing which makes the profit goes up.
The difference in net operating income indicates that inventory levels increased by 4,853 units based on the fixed manufacturing overhead cost per unit and the change in net operating income attributable to the absorption of fixed overhead costs in inventory.
The difference in net operating income between variable costing and absorption costing is due to the way fixed manufacturing overhead costs are allocated in inventory. We need to calculate the number of units by which inventory levels changed between the beginning and the end of the year. To solve the problem, we can use the difference in net operating income ($104,750 - $80,000 = $24,750) to determine the inventory change since this difference represents the amount of fixed manufacturing overhead costs that were absorbed in inventory (absorption costing) but not expensed (variable costing).
Because the total fixed manufacturing overhead was $53,550, and it was the same for both years, the change in inventory level can be found by dividing the difference in income by the fixed overhead cost per unit. The fixed manufacturing overhead cost per unit is $53,550 divided by the production quantity of 10,500 units, which equals $5.10 per unit. Therefore, the inventory level changed by $24,750 / $5.10 per unit, which equals 4,853 units.
Since net operating income is higher under absorption costing, inventory levels must have increased during the year to allocate more fixed overhead to the inventory and less to the cost of goods sold. Hence, the correct answer is a. increased by 4,853 units.
Rusty Hardware makes only cash sales. It began 2021 with a credit balance of $33,300 in the refund liability account. Sales during 2021 were $730,000. Rusty estimates that 5% of all sales will be returned. During 2021, customers returned merchandise for credit of $30,600 to their accounts. What is the balance in the refund liability account at the end of 2021?
Answer:
$39,200
Explanation:
Sales return allowance is a contra revenue account. It is deducted from the sales to calculate the net sales value. It is an adjustment account for the returns made by the customers.
Ending Balance of Sales return Allowance = Opening Balance of Allowance + Expected Sales return - Actual Sales sales return
As per given data
Opening Balance = $33,300
expected Return = $730,000 x 5% = $36,500
Actual Return = $30,600
Placing values in the formula
Ending Balance of Sales return Allowance = $33,300 + $36,500 - $30,600 = $39,200
g Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: Expense Basis for allocation Amount Rent Square feet of floor space $ 24,000 Advertising Amount of dollar sales $ 30,000 Administrative Number of employees $ 45,000 The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Number of employees A 3,000 $ 280,000 6 B 3,400 $ 300,000 8 C 3,600 $ 420,000 10 Totals 10,000 $ 1,000,000 24 What is the total advertising expense allocated to Department B?
Answer: $9,000
Explanation:
Advertising is allocated on the basis of dollar sales at $30,000.
There was a total of $1,000,000 in dollar sales.
$300,000 in dollar sales was allocated to department B
To find the advertising expense for Department B therefore is,
= (Advertising Expense / Total Dollar Sales) * Dollar sales allocated to Department B
= (30,000/ 1,000,000) * 300,000
= $9,000
$9,000 is the total advertising expense allocated to Department B.
Lopez Sales Company had the following balances in its accounts on January 1, 2018: Cash$68,000 Merchandise Inventory 48,000 Land 108,000 Common Stock 88,000 Retained Earnings 136,000 Lopez experienced the following events during 2018: Sold merchandise inventory that cost $38,400 for $81,600. Sold land that cost $43,200 for $81,000. Required Determine the amount of gross margin recognized by Lopez. Determine the amount of the gain on the sale of land recognized by Lopez.
Answer:
Lopez Sales Company
1. Amount of Gross Margin recognized by Lopez:
Sales = $81,600
Less cost of sales = $38,400
Gross Margin = $43,200
2. Amount of the gain on the sale of land recognized by Lopez:
Land:
Selling price = $81,000
less Cost = $43,200
Gain on sale = $37,800
Explanation:
a) Gross margin is the difference between the selling price and the cost price of a product. It is the profit determined before business running expenses are deducted to obtain the net income or margin.
It measures the ability of the business to generate enough income to cover expenses that are normally incurred in business, like rent, utilities, and salaries and wages.
b) The Gain on sale of any capital asset is the difference between the selling price and the cost (book value). This gain is reported separately in the income statement and is the subject of capital gains tax.
Final answer:
Lopez Sales Company recognized a gross margin of $43,200 from the sale of merchandise inventory and a gain of $37,800 from the sale of land.
Explanation:
To determine the gross margin recognized by Lopez, we look at the merchandise inventory sold. Lopez sold it for $81,600, having initially cost them $38,400 to purchase. The gross margin is the sales revenue minus the cost of goods sold, which in this case is $81,600 - $38,400 = $43,200.
For the gain on the sale of the land, we calculate the difference between the selling price and the original cost of the land. Lopez sold the land for $81,000 which originally cost them $43,200. Therefore, the gain on the sale of land is $81,000 - $43,200 = $37,800.
A leverage effect will occur if: a. fixed operating costs are greater than zero or if interest expense is less than zero b. fixed operating costs are greater than zero or if interest expense is greater than zero c. fixed operating costs are less than zero or if interest expense is greater than zero d. fixed operating costs are less than zero or if interest expense is less than zero
Answer:
B. fixed operating costs are greater than zero or if interest expense is greater than zero
Explanation: The "leverage effect" refers to the well-established relationship between stock returns and both implied and realized volatility: volatility increases when the stock price falls.
The leverage effect explains a company's Return on Equity in terms of its Return on Capital employed and Cost of debt. The leverage effect is the difference between Return on Equity and Return on Capital employed.
Leverage refers to the debt that is the borrows funds. Yet are made to enhance returns from an investment or a project. Companies use leverage to finance their assets. Such as issuing stocks or rising capital.
Leverage can take place if the company has a fixed stock that must be met with the sales volume. As leverage can increase the volatility of the stock. Increasing the levels of risks can in turn increase the returns.Hence the option b is correct.
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The most important elements in a business model include all of the following except: A. Selecting a growth strategy B. Verifying that sufficient demand exists for a given product at a given price in a particular market C. Selecting unique features and technologies to be imbedded into the products or services D. Determining how to capture a portion of the value created in terms of revenues and profits E. Identifying market segments to be targeted
Answer:
Option A
Explanation:
In simple words, business model refers to the strategy for creating a profit for a product. This defines the goods or services that the company is trying to offer, the intended audience that it has defined as well as the costs it plans.
A creative technology company must include a business plan, if only to draw funding, help it retain talent, and inspire leaders and managers. Established companies frequently have to review and revise their operating strategies, or struggle to predict emerging developments and obstacles. Investors will study and analyse the corporate strategies of all businesses that are involved in them.
Choosing a development procedure for growth is not really a part of a business framework, but a point of performance of the growth model. Other choices specifically address which kind of goods should be selected in a company with which specific market group and how you'd like to benefit from your package's particular quality.
On December 31, 2021, when its Allowance for Doubtful Accounts had a debit balance of $1,534, Indigo Corporation estimates that 8% of its accounts receivable balance of $74,100 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2022, Indigo Corporation determined that B. Jared’s account was uncollectible and wrote off $1,171. On June 12, 2022, Jared paid the amount previously written off. Prepare the journal entries on December 31, 2021, May 11, 2022, and June 12, 2022.
Answer and Explanation:
The Journal Entry is shown below:-
1. Bad debts expense Dr, $7,462
To Allowance for doubtful accounts $7,462
($74,100 × 8%) + $1,534
(Being bad debts expense is recorded)
2. Allowance for doubtful account Dr, $1,171
To Accounts receivable $1,171
(Being allowance for doubtful account is recorded)
3. Accounts receivable Dr, $1,171
To Allowance for doubtful accounts $1,171
(Being accounts receivable is recorded)
Cash account Dr, $1,171
To Accounts receivable $1,171
(Being cash is recorded)
A series of journal entries are recorded by Indigo Corporation in regards to their Allowance for Doubtful Accounts and specific customer accounts. These entries account for anticipated losses, specific account write-offs, and subsequent recovering of written off amounts.
Explanation:On December 31, 2021, Indigo Corporation predicts that 8% of its accounts receivable balance will become uncollectible, this would be $5,928 (8% of $74,100). The Allowance for Doubtful Accounts originally had a debit balance of $1,534, this should be subtracted from the estimated uncollectible amount. Therefore the adjustment to the allowance for doubtful accounts is a credit of $7,462 ($5,928 plus $1,534). The journal entry would be:
Debit: Bad Debt Expense $7,462
Credit: Allowance for Doubtful Accounts $7,462
On May 11, 2022, B. Jared’s account was identified as uncollectible and so written off. The company recorded a debit to the Allowance for Doubtful Accounts and a credit to Accounts Receivable for the $1,171. The journal entry would be:
Debit: Allowance for Doubtful Accounts $1,171
Credit: Accounts Receivable $1,171
Subsequently on June 12, 2022, Jared repaid the amount that had been written off. Indigo Corporation would record a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts for the $1,171. Afterwards, when the cash was received, they recorded a debit to Cash and a credit to Accounts Receivable for $1,171. The journal entries would be:
Debit: Accounts Receivable $1,171
Credit: Allowance for Doubtful Accounts $1,171
And
Debit: Cash $1,171
Credit: Accounts Receivable $1,171
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A stock had returns of 21.70% (1 year ago), 2.40% (2 years ago), X (3 years ago), and ‑14.60% (4 years ago) in each of the past 4 years. Over the past 4 years, the geometric average annual return for the stock was 2.85%. Three years ago, inflation was 3.62% and the risk-free rate was 4.47%. What was the real return for the stock 3 years ago?
Answer:
The real return for the stock 3 years ago is 1.47
Explanation:
In order to calculate to calculate the real return for the stock 3 years ago we would have to make first the following calculation Using geometric return:
(1+0.0285) = ((1+0.217)*(1+0.024)*(1+X)*(1-0.146))^(1/4)
X = 5.14%
Therefore, to calculate the real return we have to use the following formula:
Real return = ((1+nominal return)/(1+inflation rate)-1)*100
Real return=((1+0.0514)/(1+0.0362)-1)*100
Real return = 1.47
The real return for the stock 3 years ago is 1.47
Michael Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $36,000 to purchase equipment. The equipment will have a residual value at the end of its life of $5000. The useful life of the equipment is 4 years. The new project is expected to generate additional net cash inflows of $19,000 per year for each of the four years. Michael's required rate of return is 10%. The net present value of this project is closest to:
Answer:
$27,645
Explanation:
The computation of the net present value is shown below
Net Present value = Present value of cash inflow + Present value of residual value - Initial investment
= $19,000 × 3.170 + $5,000 × 0.683 - $36,000
= $27,645
The 3.170 is the PVIFA factor for 4 years at 10% and the discount factor for 4 year at 10% is 0.683 and we considered the same
Jones Company makes 20,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: An outside supplier has offered to sell the company all of these parts it needs for $51.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $44,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Required: a. How much of the unit product cost of $56.70 is relevant in the decision of whether to ma
Answer:
$51.60
Explanation:
The computation of the relevant cost per unit is shown below:
= Direct material per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit - applied fixed manufacturing overhead per unit
= $24.70 + $16.30 + $2.30 + $13.40 - $5.10
= $51.60
We simply added the given cost in order to find out the relevant cost per unit
Comfort Ice Cream has plans to pay decreasing annual dividends of $1.75, $1.60, and $1.45 over the next three years, respectively. After that, the firm will increase the dividend by 4 percent each year. What is the value of this stock today at a discount rate of 12 percent?
Answer:
The value of this stock today at a discount rate of 12 percent is $17.24
Explanation:
According to the given data we would have to calculate first the followng:
Year 4 dividend = 1.45 * 1.04 = 1.508
Value at year 3 = D4 / required rate - growth rate
Value at year 3 = 1.508 / 0.12 - 0.040
Value at year 3 = 18.85
Therefore, Value of stock today = 1.72 / ( 1 + 0.12)∧1 + 1.60 / ( 1 + 0.12)∧2 + 1.45 / ( 1 + 0.12)∧3 + 18.85 / ( 1 + 0.12)3
=1.53+1.27+1.03+13.41
Value of stock today = $17.24
The value of this stock today at a discount rate of 12 percent is $17.24
Answer:
$15.85
Explanation:
Worth of the stock is the present value of all the cash flows associated with the stock. Dividend is the only cash flow that a stock holder receives against its investment in the stocks. We need to calculate the present values of all the dividend payments.
Formula for PV of dividend
PV of Dividend = Dividend x ( 1 + r )^-n
1st year
PV of Dividend = $1.75 x ( 1 + 12% )^-1 = $1.56
2nd year
PV of Dividend = $1.60 x ( 1 + 12% )^-2 = $1.28
3rd year
PV of Dividend = $1.45 x ( 1 + 12% )^-3 = $ 1.03
After three years the dividend will grow at a constant rate of 4%, so we will use the following formula to calculate the present value
PV of Dividend = [ $1.45 x ( 1 + 4% ) / ( 12% - 4% ) ] x [ ( 1 + 12% )^-4 ]
PV of Dividend = $11.98
Value of Stock = $1.56 + $1.28 + $1.03 + $11.98 = $15.85
At December 31, Folgeys Coffee Company reports the following results for its calendar year.
Cash sales $905,000
Credit sales 305,000
Its year-end unadjusted trial balance includes the following items.
Accounts receivable $130,000 debit
Allowance for doubtful accounts 5,500 debit
Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 4% of credit sales, (2) 2% of total sales, and (3) 7% of year-end accounts receivable.
Answer and Explanation:
As per the data given in the question,
a) Bad debts expense A/c Dr. $12,200 ($305,000 × 4%)
To Allowance for doubtful accounts A/c $12,200
(Being bad debt expense of 4% credit sales is recorded)
b) Bad debts expense A/c Dr. $24,200 (($905,000 + 305,000) × 2%)
To Allowance for doubtful accounts A/c $24,200
(Being bad debt expense of 2% credit sales is recorded)
c) Bad debts expense A/c Dr. $14,600 (($130,000 × 7%) + $5,500)
To Allowance for doubtful accounts A/c $14,600
(Being bad debt expense of 7% of year-end accounts receivable is recorded)
ortions of the financial statements for Myriad Products are provided below.
MYRIAD PRODUCTS COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in millions)
Sales $ 760
Cost of goods sold 228
Gross margin 532
Salaries expense $ 115
Depreciation expense 84
Amortization expense 5
Interest expense 24
Loss on sale of land 4 232
Income before taxes 300
Income tax expense 150
Net Income $ 150
MYRIAD PRODUCTS COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in millions)
Year
2021 2020 Change
Cash $ 126 $ 116 $ 10
Accounts receivable 239 256 (17)
Inventory 448 466 (18)
Accounts payable 180 166 14
Salaries payable 88 102 (14)
Interest payable 49 36 13
Income tax payable 36 26 10
Required:
Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method.
Answer:
Net cash provided from Operating Activities $301
Explanation:
MYRIAD PRODUCTS COMPANY
Cash flow from Operating Activities:
Net Income $150
Adjustment for non cash effects:
Depreciation $84
Amortization $5
Loss on sale of land $4
Total $243
Changes in operating assets and liabilities :
Decrease in Accounts receivable $17
Decrease in Inventory $18
Increase in Accounts Payable $14
Decrease in Salaries Payable ($14)
Increase in Interest Payable $13
Increase in Income tax Payable $10
Net cash provided from Operating Activities $301
Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.
a. Al is in violation of the sales agreement.
b. The two-year provision is likely to be held invalid, because it is too long a period of time.
c. The agreement is invalid, because it is an illegal restraint of trade.
d. The agreement is illegal, because it is a violation of public policy.
Answer:Option(a) is correct option
Explanation:
According to the question, agreement between Al and CPA firm members suggests that Al cannot practice accounting under 20 miles of Redwood city for two years.
Even after being under contract conditions,Al tends to attend his accounting clients on weekends in his home situated in Redwood city.He is considered to be violating agreement terms because even though he is attending clients on weekends and in unofficial area ,he is still carrying out his accounting practice under 20 miles of Redwood city.Thus, sales agreement is getting breached by Al.
Other options are incorrect because two year period for refrain is not long as per agreement, agreement is not invalid and neither illegal because of public policy.Thus, the correct option is option(a).
Consider the following methods of pollution reduction;
a. the government sets a target for maximum emissions
b. the government mandates the installation of specific pollution abatement equipment
c. the government imposes a per unit tax on the good that creates pollution
d. the government gives firms a tax rebate for every unit of pollution abated
Which of the above is an example of a command -and-control approach to reducing pollution?
A. a, b, c, and d
B. a, b, and d only
C. a and b only
D. b only
E. a only
Answer:
option c: A and B
Explanation:
Pollution is common in all environment. be it air pollution, water pollution e.t.c and it is very essential to controland reduce the effect of this pollution in our air, land and water. when we make use of our energy in all, transport and other goods and services more carefully, we can reduce harmful emissions to our air, land and water.
(Hard) Dozier Corporation is a fast-growing supplier of office products. Analysts project the attached free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dozier's WACC is 13%. Suppose Dozier has $100 million of debt and 10 million shares of stock outstanding. What is your estimate of the current price per share (stock price)
Answer:
Find attached full question:
The correct option is D.$42.79
Explanation:
In order to determine the current price per share of the company now,we discount all future free cash flows to present value as well as the company's terminal value:
company's terminal is the value of the company after the considered timing horizon
terminal value=free cash in year three*(1+g)/r-g
free cash flow in year three is $40 million
g is the growth rate of free cash flow which is 7%
r is the WACC of 13%
terminal value=40*(1+7%)/(13%-7%)=$ 713.33 million
Present of the company=-$20/(1+13%)+$30/(1+13%)^2+$40/(1+13%)^3+$713.33/(1+13%)^3=$ 527.89 million
The company's value of equity=present worth-debt== 527.89-100=427.89 million
share price=value of equity/number of shares== 427.89/10=$42.79
The current stock price of Dozier Corporation can be estimated using a two-stage discounted cash flow model. This involves discounting the projected free cash flows for the next 3 years at the company's weighted average cost of capital (WACC), then calculating the present value of all future cash flows growing at a constant rate using the Gordon Growth Model. The market value of the firm obtained is then adjusted for debt and divided by the number of outstanding shares to yield the estimated current price per share.
Explanation:The current stock price of Dozier Corporation can be estimated using a two-stage discounted cash flow model because the free cash flow is expected to grow at a steady rate after a period of 3 years. In the first stage, we discount the free cash flows for the next 3 years at Dozier Corporation's weighted average cost of capital (WACC) of 13%. In the second stage, we use the Gordon Growth Model to calculate the present value of all future cash flows growing at a constant rate of 7%. The net present value (NPV) gives us the market value of the firm. To get the price per share, we deduct the debt and divide it by the number of shares outstanding.
Example Calculation
Given FCFs (free cash flows) of $15 million, $20 million, and $25 million for the next 3 years respectively. Stage 1: NPV of explicit forecast period (3 years) = $15m/(1+13%)^1 + $20m/(1+13%)^2 + $25m/(1+13%)^3. Stage 2: Value of perpetual cash flows from year 4 onwards = ($25m * (1+7%)) / (13% - 7%). Deduct $100m of debt from this total value and divide by 10 million outstanding shares to yield the estimated current price per share.
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Part 5: Joint Product Costs (10 points) Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Required: What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point
Question
Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product X Product Y Total Allocated joint processing costs $22,400 $19,600 $42,000 Sales value at split-off point $32,000 $28,000 $60,000 Costs of further processing $11,600 $25,300 $36,900 Sales value after further processing $44,800 $53,200 $98,000 Required: (a) What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
Answer:
Net monetary advantage = $11,200
Explanation:
Sales
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all costs incurred up to the split-off point are irrelevant to the decision to process further .
We can apply this principle to the question as follows:
$
Sales revenue after the split-off point 44,800
Sales revenue at the split-off point (32,000)
Additional sales revenue 12,800
Further processing cost (11,600)
Increase in Net income 11,200
Net monetary advantage = $11,200
Kindly note that the allocated joint cost of 22, 400 to product X is a sunk cost. This implies whether or not the Product X is processed further the sunk cost is irrelevant to the decision
Clancy's Motors has the following demand to meet for custom manufactured fuel injector parts. The holding cost for that item is $0.75 per month and each setup costs $150. Lead-time is 0 months. Calculate the planned order releases using: (a) the EOQ technique, and (b) the POQ technique, (c) the lot-for-lot technique. What are the costs of each plan, including the holding cost of any inventory left over after month 7? Show POM-QM results.
Answer:
a) EOQ ≈ 250
b) POQ = 1.59 ≈ 2 months
c) Cost of EOQ = 1275 USD
Cost of POQ = 937.5 USD
Explanation:
Again, the essential data is not provided in this question but I have found this question on internet and I will share the required data here in this solution:
a) EOQ = Economic Order Quantity:
FIrst of all, we have to calculate EOQ and for that we have following formula:
Holding Cost = 0.75
Setup Cost = 150
So, here's the required data which is missing in the question:
Month 1 2 3 4 5 6 7
Requirement 100 150 200 150 100 150 250
Now, we are good to go:
So, from the above data we will calculate the Demand:
Demand (D) = Sum of requirement / Total Time Period
D = 100 + 150 + 200 + 150 + 100 + 150 + 250/ 7
D = 157.14
Formula for EOQ:
EOQ = [tex]\sqrt{\frac{2SD}{H} }[/tex]
S = Setup Cost = 150
D= Demand = 157.14
H = Holding Cost = 0.75
Let's plug in the values:
EOQ = [tex]\sqrt{\frac{2*150*157.14}{0.75} }[/tex]
EOQ = 250.71
EOQ ≈ 250
So, the economic order quantity for the above given data is 250 units.
b) POQ = Periodic Order Quantity
Periodic Order Quantity = Economic Order Quantity/ Demand
POQ = 250/157.14
POQ = 1.59 ≈ 2 months
Now, as we have both POQ and EOQ at hand. Next step is to calculate the cost of each plan as mentioned in the question. For which we need MRP of each plan.
1. Cost of Economic Order Quantity:
First of all let me write down the MRP = Materials Requirement Planning Data for EOQ:
Requirement 100 150 200 150 100 150 250
Available 0 150 0 50 150 50 150
Ordered 250 0 250 250 0 250 250
End Inventory 150 0 50 150 50 150 150 700
Now, Let's Calculate the Cost of EOQ:
Setup Cost = Number of Orders x Setup Cost Given
Setup Cost = 5 x 150
Setup Cost = 750 USD
Holding Cost = Holding Cost per item given x Number of Inventory held
Holding Cost = 0.75 x 700
Holding Cost = 525 USD
Now, Calculate the Total Cost of EOQ:
Total Cost of EOQ = Setup Cost + Holding Cost
Total Cost of EOQ = 750 + 525
Totol Cost of EOQ = 1275 USD
2. Cost of POQ:
Similarly, we have to calculate the Cost of POQ. For that, we need MRP of POQ as well:
MRP for POQ:
Requirement 100 150 200 150 100 150 250
Available 0 150 0 150 0 150 0
Ordered 250 0 350 0 250 0 250
End Inventory 150 0 150 0 150 0 0 450
Setup Cost = Number of Orders x Setup Cost Given
Setup Cost = 4 x 150
Setup Cost = 600 USD
Holding Cost = Holding Cost per item given x Number of Inventory held
Holding Cost = 0.75 x 450
Holding Cost = 337.5 USD
Total Cost of EOQ = Setup Cost + Holding Cost
Total Cost of EOQ = 600 + 337.5
Totol Cost of EOQ = 937.5 USD
Final answer:
Without detailed demand figures and inventory costs for Clancy's Motors, calculating planned order releases and their associated costs using EOQ, POQ, and lot-for-lot techniques is not possible. However, each technique is explained along with how costs would generally be calculated.
Explanation:
The question asks for the calculation of planned order releases for Clancy's Motors using three techniques: EOQ (Economic Order Quantity), POQ (Periodic Order Quantity), and the lot-for-lot technique, along with the costs associated with each plan, including the holding cost after month 7. However, the specific demand figures, along with other necessary data to perform these calculations directly relevant to Clancy's Motors, are missing. Therefore, a general explanation of each technique and how costs are calculated is provided instead.
EOQ is a formula used to determine the optimal order quantity that minimizes the total inventory costs, including ordering and holding costs. The EOQ model is used when demand is constant over the year and each new order is delivered in full when inventory reaches zero.
POQ is an inventory management policy that orders at fixed intervals and varies the quantity ordered each time. The goal is to match supply closely with predictable demand while minimizing inventory costs.
The lot-for-lot technique orders exactly what is required for the next period, minimizing holding costs but potentially increasing ordering costs if the demand is frequent.
Without specific demand figures or inventory costs directly from Clancy's Motors, a detailed calculation for each method and associated costs cannot be completed. Normally, costs are derived using formulas specific to each technique, factoring in aspects like ordering costs, holding costs, demand rate, and production or purchase cost per unit.
Diamond Boot Factory normally sells their specialty boots for $375 a pair. An offer to buy 100 boots for $275 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $250 and special stitching will add another $20 per pair to the cost.
Determine the differential income or loss per pair of boots from selling to the organization.
Answer:
$5
Explanation:
Differential revenue:
Revenue per pair of boots $275
Differential costs:
Variable manufacturing costs $(250)
Additional decoration (20) (270)
Differential profit from accepting special order($275-$270) $5
Therefore the differential income or loss per pair of boots from selling to the organization will be $5 which means Diamond Boot Factory should accept the special order.
Answer:
incremental income of $ 500 will result from the special offer.
Explanation:
Consider the incremental costs and revenues resulting from accepting the special offer.
Sales (100×$275) 27,500
Variable cost (100×$250) (25,000)
Special Stitching (100×$20) (2,000)
Net Income/Loss 500
Therefore an incremental income of $ 500 will result from the special offer.
yas net fixed assets as $15 million. The fixed assets could currently be sold for $21 million. Muffin’s current balance sheet shows current liabilities of $6.0 million and net working capital of $5.0 million. If all the current accounts were liquidated today, the company would receive $7.30 million cash after paying the $6.0 million in current liabilities. What is the book value of Muffin’s Masonry’s assets today and the market value of these assets?ur full-service brokerage firm charges $115 per stock trade.How much money do you receive after selling 145 shares of Nokia Corporation (NOK), which trades at $16.53? (
Answer:
Book Value = $26 million
Market value = $34.3 million
Explanation:
The computation of book value and the market value is shown below:-
For computing the book value first we need to find out the current assets
Current assets = Working capital + Current liabilities
= $5.0 million + $6.0 million
= $11.0 million
Total book value = Current assets + Fixed assets
= $11.0 million + $15 million
= $26 million
For computing the market value first we need to find out the current assets
Current assets = Cash + Current liabilities
= $7.30 million + $6.0 million
= 13.3 million
Total market value = Fixed assets + Current assets
= $21 million + 13.3 million
= $34.3 million
Company S is shifting to a new culture that focuses on being assertive with its clients and emphasizes company’s policy of prudence to all his new employees. According to Hofstede’s dimensions, Company S has cultural values of _________. a. masculinity and long-term orientation b. uncertainty avoidance and masculinity c. power distance and uncertainty avoidance d. collectivism and power distance
Answer: b. uncertainty avoidance and masculinity
Explanation:
Hofstede’s cultural dimensions is a framework of analysis proposed by Geert Hofstede which speaks on how different cultures communicate in relation to the influence that society has on its members.
There are 6 dimensions but for this question we shall speak on 2.
1. Uncertainty Avoidance
It speaks on the general uneasiness that people in society feel due to Uncertainty. People just don't like to feel uncertain and hate it when they do not know what will happen. Company S wants to pursue a new culture that focuses on Prudence with new employees which means that they will be less uncertain about their roles.
2. Masculinity.
This dimension speaks on the general tendency of society to gravitate towards assertiveness, heroism and achievement. Company S aims to be more Assertive with clients so that new culture would fall under this dimension.
Final answer:
Company S is adopting a culture that values assertiveness and prudence, which aligns with Hofstede’s dimensions of masculinity and uncertainty avoidance.
Explanation:
According to Hofstede’s dimensions of culture, the values of being assertive with clients and emphasizing a policy of prudence suggest that Company S has cultural values of masculinity and uncertainty avoidance. Masculinity in this context refers to a preference in society for achievement, heroism, assertiveness, and material rewards for success. Uncertainty avoidance indicates the degree to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these. Option B is correct .
Company S's shift to a culture that promotes assertiveness aligns with Hofstede’s masculinity dimension, as it values competitiveness and assertiveness in business dealings. Additionally, the emphasis on prudence implies a strong desire to minimize uncertainty, aligning with the uncertainty avoidance dimension. This reflects a culture that has a lower tolerance for ambiguity and a higher need for formal rules and policies.
According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had a. increased, so it would decrease production. b. decreased, so it would increase production. c. decreased, so it would decrease production. d. increased, so it would increase production.
Answer:
Option C
Explanation:
In simple words, The misconceptions principle or theory in short run maintains that when a retailer sees its commodity prices fall, it makes an incorrect inference that its relative values have decreased as well. The confusion appears to cause dealers to provide the marketplace with less volume. Thus, from the above we can conclude that the correct option is C .
A successful sushi chain in Hong Kong spent $500,000 to conduct a study on whether to open a location in the United States. The study showed that the best place for the company to open their first location would be in Chicago. When conducting its capital budgeting analysis, how should the company account for the cost of the study when estimating the amount of the initial investment that the new store will require
When determining the initial investment for opening a new store, the sushi chain should include the cost of the study conducted. This cost is considered a sunk cost and should be added to the total initial investment amount.
When conducting its capital budgeting analysis, the sushi chain should account for the cost of the study as part of the initial investment for the new store in Chicago.
Include the $500,000 study cost in the total initial investment amount.
This cost would be considered a sunk cost, meaning it has already been incurred and cannot be recovered.
By adding the study cost to the initial investment, the company gets a more accurate picture of the total funds needed to open the location in Chicago.
Vaughn, Inc. has 2400 shares of 4%, $50 par value, cumulative preferred stock and 48000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2018. The board of directors declared and paid a $3800 dividend in 2019. In 2020, $17400 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2020
Answer: Preferred Shareholders will receive $5,800 and Common Shareholders will receive $11,400 in dividends.
Explanation:
With Cumulative Preferred Shares, their dividends must always be paid and if they cannot be paid, they are accrued until such a time as they can be paid.
Vaughn, Inc. has 2400 shares of 4%, $50 par value, cumulative preferred stock which means that the dividends due on them are,
= 2,400 * 50 * 4%
= $4,800
The board of directors declared and paid a $3,800 dividend in 2019 which is $1,000 less than the total amount of dividends to be paid to the preferred shareholders.
That means that the entire $3,800 in 2019 went to Preferred Shareholders and they are infact still owed $1,000.
In 2020 therefore their dividend payment should be,
= 4,800 + 1,000
= $5,800
Common Shareholders will receive,
= 17,400 - 5,800
= $11,600
Preferred Shareholders will receive $5,800 and Common Shareholders will receive $11,400 in dividends in 2020.
On January 1, 2020, the Sheridan Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020. Sales units: First quarter 5,200; second quarter 6,000; third quarter 7,000. Ending raw materials inventory: 40% of the next quarter’s production requirements. Ending finished goods inventory: 25% of the next quarter’s expected sales units. Third-quarter production: 7,630 units. The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound. Prepare a production budget by quarters for the 6-month period ended June 30, 2020. SHERIDAN COMPANY Production Budget Quarter 1 2 Six Months : : Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020. SHERIDAN COMPANY Direct Materials Budget Quarter 1 2 Six Months : : $ $ $ $ $
Answer and Explanation:
The preparation of the production budget and direct material budget is presented below:
As per the data given in the question,
Sheridan company
Production Budget
For six months ending June 30,2020
Quarter
1 2 six months
Expected units sales 5,200 6,700
Add: units of desired ending finished goods 1,675 1,750
Total units 6,875 8,450
Less: Finished good units 1,300 1,675
Required units for production 5,575 6,775 12,350
Quarter 2 required finished goods = 25% × Unit sales of quarter 3
= 25% × 7,000
= 1,750
Sheridan company
Direct material Budget
For six months ending June 30,2020
Quarter Quarter
1 2 Six months 3
Units to be produced 5,575 6,775 7,630
Direct material per unit 3 3 3
Total need for production 16,725 20,325 22,890
Add: Required ending direct material 8,130 8,856
(20,325 × 40%) (22,890 × 40%)
Total material required 24,855 29,181
Less: Beginning direct material 6,690 8,130
(16,725 × 40%)
Direct material purchased 18,165 21,051
Cost per pound 4.00 4.00
Total cost $72,660 $84,204 $156,864
Hankins Corporation has 6.1 million shares of common stock outstanding, 314,000 shares of 4.5 percent preferred stock outstanding, par value of $100, and 67,000 5.5 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $73.80 per share and has a beta of 1.17, the preferred stock currently sells for $105.40 per share, and the bonds have 20 years to maturity and sell for 95.5 percent of par. The market risk premium is 6.5 percent, T-bills are yielding 3.1 percent, and the firm’s tax rate is 22 percent.
What is the firm's market value capital structure?
Answer:
The firm's market value capital structure is $611,245,600.00
Explanation:
Hankins Corporation firm's market value of capital structure is the sum of the market worth of common stock,preferred stock and the debt financing.
The market value of equity is the number of common stock issued and outstanding multiplied by market price per share
The market value of the preferred stock is the number of preferred stock issued multiplied by the market value per unit of preferred stock,same applies to debt(bonds issued)
Market value of equity=6,100,000*$73.80=$ 450,180,000.00
Market of preferred stock=314,000*$105.40=$33,095,600.00
Market value of bonds=67,000*$2000*95.5%=$ 127,970,000.00
Total market value $611,245,600.00
Consider a product with a daily demand of 400 units, a setup cost per production run of $100, a holding cost per unit of $24.00, and an annual production rate of 292,000 units. The firm operates and experiences demand 365 days per year. a. What is the Production Order Quantity? (Select] b. What is the max inventory on hand? (Select] c. What is the average inventory? (Select] d. What are the total holding costs? $ (Select] e. What does it cost to manage the inventory?
Answer:
a. The Production Order Quantity is 1,560 units
b. The Maximum inventory is 780 units
c. The Average inventory is 390 units
d. The Total holding cost is $9,360
e. To manage the inventory cost $18,718.97
Explanation:
a. According to the given data we have the following:
Annual Production rate = 292,000 units
Daily production rate(p) = Annual production rate / number of days per year = 292,000/365 = 800 units
Demand rate(d) = 400 units per day
Number of days per year = 365
Annual demand(D) = d × number of days per year = 400 × 365 = 146,000 units
Set up cost(S) = $100
Holding cost (H) = $24
Therefore to calculate the Production Order Quantity we have to use the following formula:
production order quantity(Q) = √ {2DS / H [1-(d/p)]}
= √ {(2x146,000x100) /24[1-(400/800)]}
= √ [29,200,000/24(1-0.5) ]
= √ [29,200,000/(24 x 0.5)]
= √ (29,200,000/12)
= √2,433,333.3333
= 1,560 units
b. To calculate the Maximum inventory we use the following formula:
Maximum inventory ( I - max) = (Q/p) (p-d) = (1560/800)(800-400) = 1.95 x 400 = 780 units
c. To calculate the Average inventory we use the following formula:
Average inventory = I-max/2 = 780/2 = 390 units
d. To calculate the Total holding cost we use the following formula:
Total holding cost = [(I-max / 2) H] = (780/2)24 = 390 × 24 = $9,360
e. To calculate What does it cost to manage the inventory we use the following formula:
Total cost = Annual holding cost + Annual setup cost
Annual setup cost = (D/Q) S = (146000/1560)100 = $9,358.97
Therefore, Total cost =$9,360 + $9,358.97
= $18,718.97