Your client has $ 99 comma 000 invested in stock A. She would like to build a​ two-stock portfolio by investing another $ 99 comma 000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5 % and as low a risk as​ possible, but the standard deviation must be no more than​ 40%. What do you advise her to​ do, and what will be the portfolio expected return and standard​ deviation?

Answers

Answer 1

Answer:

Portfolio Returns = 14% for Stock B

Portfolio Returns = 14% for Stock C

Portfolio Standard Deviation for Stock C = 34.9%

Portfolio Standard Deviation for Stock B = 32.8%

Here, we can see that, in both stocks expected return rate is same but the portfolio standard deviation for Stock B is lesser than Stock C. So, I advise her to invest in Stock B.

Explanation:

First of all, let be clear to you that, this question is incomplete and lacks data essential data. I have found similar question on the internet and I am going to share that data with you. Hope, the purpose of solving this question will be fulfilled.

Expected Return .              Standard Deviation .     Correlation with Stock A

Stock A =  15%                         49%                                1.00

Stock B = 13%                          38%                                 0.12

Stock C = 13%                          38%                                 0.28

Now, we have complete data. Let's solve this problem.

Condition: If my client invest in Stock B

then,

Expected Returns of stocks A & B will be as follows:

Expected Return of Stock A (R1) = 15%

Expected return of Stock B (R2)  = 13%

and Standard Deviation of Stocks A & B will be as follows:

SD of Stock A (SD1) = 49%

SD of Stock B (SD2) = 38%

and weights depending on the amount of money invested on stocks A & B will be as follows:

Weight of Stock A (W1) = 50%

Weight of Stock B (W2) = 50%

Note: Weights are 50% each because, same amount of money is invested in two stocks i.e 99000 USD in Stock A and 99000 USD in Stock B.

So, for all of these data, our correlation with Stock A will be as follows:

Correlation of Stock B with Stock A = 0.12

Now, as we have all the data ready to be plugged into the formula. Let's write down the formula for portfolio return:

Portfolio Returns = W1xR1 + W2xR2 = (0.15x0.50) + (0.13x0.50) =   0.14 x 100 = 14%

Portfolio Returns = 14%

Now, it's time to calculate the Portfolio Standard Deviation:

Portfolio Standard Deviation = (W1² * SD1² + W2² * SD2² + 2*(W1)*(W2)*Correlation* SD1* SD2)^(1/2)

Portfolio Standard Deviation = [(50%² X 49%²) + (50%² X 38%²) + (2 X 50% X 50% X 0.12 X 49% X 38%)]^(1/2)

Portfolio Standard Deviation = 32.8%

Condition: If my client invest in Stock C

then,

Expected Returns of stocks A & C will be as follows:

Expected Return of Stock A (R1) = 15%

Expected return of Stock C (R3)  = 13%

and Standard Deviation of Stocks A & C will be as follows:

Standard Deviation of A (SD1) = 49%

Standard Deviation of C (SD3) = 38%

and weights depending on the amount of money invested on stocks A & C will be as follows:

Weight of A (W1) = 50%

Weight of C (W3) = 50%

So, for all of these data, our correlation with Stock A will be as follows:

Correlation of Stock C with Stock A = 0.28

Now, as we have all the data ready to be plugged into the formula. Let's write down the formula for portfolio return:

Portfolio Returns = W1R1 + W3R3 = (0.15*0.50%) + (0.13*0.50) = 0.14 X 100 = 14%

Now, it's time to calculate the Portfolio Standard Deviation:

Portfolio Standard Deviation = (W1² * SD1² + W3² * SD3² + 2*(W1)*(W2)*Correlation* SD1* SD3)^(1/2)

Portfolio Standard Deviation= [(50%² X 49%²) + (50%² X 38%²) + (2 X 50% X 50%X 0.28 X 49% X 38%)]^(1/2)

Portfolio Standard Deviation = 34.9%

Here, we can see that, in both stocks expected return rate is same but the portfolio standard deviation for Stock B is lesser than Stock C. So, I advise her to invest in Stock B.


Related Questions

2020 2019 Cash $1,800 $1,150 Receivables 1,750 1,300 Inventory 1,600 1,900 Plant assets 1,900 1,700 Accumulated depreciation (1,200 ) (1,170 ) Long-term investments (held-to-maturity) 1,300 1,420 $7,150 $6,300 Accounts payable $1,200 $900 Accrued liabilities 200 250 Bonds payable 1,400 1,550 Common stock 1,900 1,700 Retained earnings 2,450 1,900 $7,150 $6,300 PAT METHENY COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 Sales revenue $6,900 Cost of goods sold 4,700 Gross margin 2,200 Selling and administrative expenses 930 Income from operations 1,270 Other revenues and gains Gain on sale of investments 80 Income before tax 1,350 Income tax expense 540 Net income 810 Cash dividends 260 Income retained in business $550
Prepare a statement of cash flows using the direct method.

Answers

Answer and Explanation:

The presentation of the cash flow statement using the direct method is shown below:

                                  Pat Methney Company

                                   Statement of cash flow

                             For year ended Dec-31,2020

Cash flow from operating activities :

Cash collection from customers($1,300+$6,900-$1,750) $6,450

Less: Cash paid for merchandise($1,600+$4,700+$900-$1,900-$1200) $4,100

Cash paid for selling($250+$930-$30-$200) $950

Cash paid for income taxes $540                                        $5,590

Net cash provided by operating activities($6,450-$5,590) $860

Cash flow from investing activities :

Sale of held-to-maturity investments ($1420-$1300+$80) $200

Less: Purchase of plant assets ($1,900-$1,700-$70) $130

Net cash provided $70

Cash flow from financing activities :

Issuance of capital stock($1,900-$1700-$70) $130

Less: Retirements of bonds payable $150

Less: Payment of cash dividend $260

Net cash used by financing activities $280

Net increase in cash $650

Add Cash as on  Jan-1,2020 $1,150

Cash as on Dec-31,2020 $1,800

Non-cash investing and financing activities :

Issuance of common stock for plant assets $70

Suppose the price of salt increases by 25 percent​ and, as a​ result, the quantity of pepper demanded​ (holding the price of pepper ​constant) increases by 4 percent. The​ cross-price elasticity of demand between salt and pepper is nothing. ​(Enter your response rounded to two decimal places and include a minus sign if​ appropriate.) In this​ example, salt and pepper are ▼ substitutes not related complements . ​Instead, suppose salt and pepper were complements. If​ so, then the​ cross-price elasticity of demand between salt and pepper would be A. negative. B. zero. C. positive. D. greater than 1. E. greater than minus1.

Answers

Answer:

Option (C)

Explanation:

As per the data given in the question,

Price of salt increases by = 25%

Quantity of pepper demanded increases by = 4%

Cross price elasticity = Quantity of demand increases ÷ Price of salt increases

= 4% ÷ 25%

=0.16  

Hence Cross-price elasticity of demand between salt and pepper would be positive.

So option (C) is answer

Final answer:

The cross-price elasticity of demand between salt and pepper determines whether they are substitutes or complements. If the cross-price elasticity is zero, they are substitutes. If it is negative, they are complements.

Explanation:

In this scenario, the cross-price elasticity of demand between salt and pepper is zero, indicating that they are not related complements. If salt and pepper were complements, the cross-price elasticity of demand between them would be negative. This means that as the price of one product increases, the quantity demanded of the other product would decrease.

Learn more about Cross-Price Elasticity of Demand here:

https://brainly.com/question/33762697

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Ralirali​ Corporation's financial statements included the following amounts for the current​ year: Issued new shares of preferred stock ​$98,000 Loaned cash to key supplier 26 comma 000 Bought new delivery truck for cash 51 comma 000 Proceeds from the sale of used production machinery 23 comma 000 Sold treasury stock ​31,000 Based on this​ information, what is the amount of net cash provided​ (used) by investing​ activities?

Answers

Answer:

-$48,000

Explanation:

The computation of the amount of net cash provided or used by investing activities is shown below:

Cash flow from Investing Activity

Proceeds from the sale of used production machinery $29,000

Loaned cash to key supplier  -$26,000

Brought new delivery truck for cash -$51,000

Net cash used by investing activities -$48,000

The negative sign represents the outflow of cash while the positive sign represents the inflow of cash

The Lebanese steel factory “STEEL CO” was the leader in its market for many years. Today, the management noticed that sales are decreasing since the market prices are dropping down due to unbeatable offers and discounts from other companies operating in the market for more than 20 years ago.

The management decided to use “Analytical Power” (software) to analyze the market by collecting data online via Internet from many websites and saving this data on large servers. As a result, “Steel Co.” decided to change its production line to manufacture steel products only to luxurious villas and residential homes, located in high level areas of Lebanon. This strategy helped the company to sell targeted customers at higher prices making higher revenues. The new system includes a Website allowing customers to select online the designs they wish, and even to customize the products based on quality, colors, styles, etc…
Case Questions (6 points each)

1)What is the force according to Porter’s competitive forces model, faced by the company? *
Customers
Suppliers
New market entrant
Traditional competitor

2)What is the information system strategy (or strategies) used by the company to face the forces? *

Focus on market niche
Focus on market niche & Low cost leadership
Focus on market niche & Customer intimacy
Product differentiation & Customer intimacy

3)What are the main IT components mentioned in this case? *
a) Software / Telecommunications / Physical facilities
b) Hardware / Software.
C) Software / Telecommunications / Hardware
d) Telecommunications / Software

4)If the company is not sure which IS strategy to use in order to face the competitive forces, which model may best help in this case? *
Porter competitive forces
Value chain
Porter strategies
Economic impacts

5)To which type of system the “Analytical Power” software belongs? *
DSS
ESS
MIS
TPS

Answers

Answer:

1.) Traditional competitor

2.) Product differentiation & Customer intimacy

3.) C

Software / Telecommunications / Hardware

4.) Value chain

5.) ESS

Explanation:

1.) The company was aware of its competitors' marketing strategies and pricing to any changes made. Rivalry among competitors tends to be cutthroat and industry profitability low while having the potential factors.

3.) An information system is essentially made up of five components hardware, software, database, network and people. These five components integrate to perform input, process, output, feedback and control. Hardware consists of input/output device, processor, operating system and media devices.

4.) Value chain is the process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales service.

5.) An Executive Support System (ESS) is software that allows users to transform enterprise data into quickly accessible and executive-level reports, An ESS enhances decision making for executives. ESS is also known asExecutive Information System (EIS).

Answer 1):

The correct option here is D) Traditional Competitors

Explanation:

The five forces of competition when analyzed they help a business understand the factors in its external environment. It is also helpful in crafting a strong business strategy that increases the chances of the company to win over its competition in the market.

If sales were declining due to very mouth-watering offers from other companies who are over 20 years in the industry, then the force Lebanese Steel Factory has to contend with is Traditional Competitors.  

Answer 2)  

The correct option here is C)  

Explanation:

The information system deployed by Lebanese Steel Factory helped them to identify a niche area in the market which is the ability to customize product requests. By doing this, the demonstrated a kind of empathy for what the customer wants.  

Their new system allowed customers to order for steel in a way no company in the market was doing it.  

Answer 3)

The correct option her is B) Hardware/Software

Explanation:

There is no mention of telecommunications which is a technology that enables one to communicate via radio frequency over a long distance.

The "Analytical Power" however is a software. Softwares require hardware (that is a computer which may or may not be remote) to run.

Answer 4)

The correct option here is C) Porters Strategies

Explanation:

There are generic strategies identified by Michael Porter that a business can adopt to beat the competition. They are:

Cost Leadership, Differentiation and Focus strategies.

Answer 5)

The correct option here is C) MIS

Explanation:

MIS stands for Management Information System.

This is often used to refer to any computerized system that enables one to acquire data, process data into usable information, store both the data and information and generate reports based on such information for use in decision making by the management.

Cheers!

Michael's, Inc., just paid $2.20 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.8 percent. If you require a rate of return of 9 percent, how much are you willing to pay today to purchase one share of the company's stock?

Answers

Answer:

The maximum price that should be paid for one share of the company today is $54.895

Explanation:

The price of a stock that pays a dividend that grows at a constant rate forever can be calculated using the constant growth model of Dividend discount model (DDM) approach. The DDM values a stock based on the present value of the expected future dividends. The formula for price today under this model is,

P0 = D1 / r - g

Where,

D1 is the expected dividend for the next period or D0 * (1+g)r is the required rate of returng is the growth rate in dividends

SO, the maximum that should be paid for this stock today is:

P0 = 2.2 * (1 + 0.048)  /  (0.09 - 0.048)

P0 = $54.895 rounded off to $54.90

A department adds raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were no units in the beginning goods in process inventory; 110,000 units were started into production in January. There were 30,000 units that were 40% complete in the ending goods in process inventory at the end of January. What were the equivalent units of production for materials for the month of January?

Answers

Answer:

110,000 units

Explanation:

Given that

Started units in inventory = 110,000 units

Ending  inventory units = 30,000 units

Completion percentage = 40%

Based on the above information, the equivalent units of production for the material is equal to the started units in inventory i.e 110,000 units as it already includes the ending inventory plus the given percentage is also considered for the same

Windsor Locomotive Corporation purchased for $550,000 a 40% interest in Lopez Railways, Inc. This investment enables Windsor Locomotive to exert significant influence over Lopez Railways. During the year, Lopez Railways earned net income of $149,000 and paid dividends of $27,000. Prepare Windsor Locomotive’s journal entries related to this investment.

Answers

Answer:

Journal Entries

Dr. Investment in Lopez Railways Inc.  $600,000  

Cr. Cash                                     $600,000

Dr. Investment in Lopez Railways Inc                   $59,600

Cr. Income of Investment in Lopez Railways Inc $59,600

Dr. Cash                                                 $10,800

Cr. Investment in Lopez Railways Inc  $10,800

Explanation:

As Windsor Locomotive Corporation has purchased 40% interest in Lopez Railway Inc.Lopez Inc. is classified as the associate company of Windsor Corp.

Share in net Income = $149,000 x 40% = $59,600

Share In Dividend = $27,000 x 40% = $10,800

Equipment with a book value of $80,000 and an original cost of $164,000 was sold at a loss of $34,000. Paid $103,000 cash for a new truck. Sold land costing $330,000 for $410,000 cash, yielding a gain of $80,000. Long-term investments in stock were sold for $94,200 cash, yielding a gain of $15,500. Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)

Answers

Answer:

Cash flows from investing activities is $653,200.

Explanation:

XYZ Company

Statement of cash flows (extract)

Proceed from sale of equipment ($80,000 - $34,000)               $46,000

Purchase of vehicle                                                                       $103,000

Proceed from sale of land                                                            $410,000

Proceed from sale of long-term investments in stock                 $94,200

Cash flows from investing activities                                        $653,200

World Company expects to operate at 80% of its productive capacity of 66,250 units per month. At this planned level, the company expects to use 26,500 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.500 direct labor hours per unit. At the 80% capacity level, the total budgeted cost includes $53,000 fixed overhead cost and $331,250 variable overhead cost. In the current month, the company incurred $389,000 actual overhead and 23,500 actual labor hours while producing 50,000 units. (1) Compute the overhead volume variance. (2) Compute the overhead controllable variance.

Answers

Answer:

Overhead volume variance = $3,000 Unfavorable

Overhead controllable variance = $26,500 unfavorable

Explanation:

As per the data given in the question,

a)

Number of units produced = 80% × 66,250

= 53,000  units

Standard = 26,500 hours ÷ 53,000 units

= 0.5 direct labor hour per unit

Particulars                        a                 b               Direct labor hour(a ÷ b)

Variable overhead rate $331,250      26,500        $12.5 per hour

Fixed overhead rate       $53,000       26,500        $2 per hour

Total overhead rate      $384,250                          $15 per hour

The standard hours to produce 50,000 units = 25,000 (50,000 units × 0.50 hours per unit.)

Applied fixed overhead = $2 × 25,000

= $50,000

Overhead fixed volume variance is

= $53,000 - $50,000

= 3,000 unfavorable

Now

b) Standard hour = 50,000 units × 0.5 direct labor hour per unit

= 25,000

Overhead rate(a) Standard hours(b) Applied overhead(a × b) Actual variance

Variable overhead $12.5 25,000 $312,500

Fixed overhead $2 25,000 $50,000

Total overhead $14.5               25,000           $362,500       $389,000

= $362,500 - $389,000

$26,500 unfavorable

If the actual cost is more than the standard one than the variance should be unfavorable and If the actual cost is less than the standard one than the variance should be favorable

On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021: $5,000,000, 12% bonds $3,000,000, 8% long-term note Construction expenditures incurred during 2021 were as follows: January 1 $ 600,000 March 31 1,200,000 June 30 800,000 September 30 600,000 December 31 400,000 Required: Calculate the amount of interest capitalized for 2021 using the specific interest method

Answers

Answer: $177,750

Explanation:

January 1st  

Construction expenditure 600,000

outstanding interest   12/12= 1

Accumulated expenditure= 600,000

x1 = $600,000

March 31

Construction expenditure = 1,200,000

outstanding interest  9/12=3/4

Accumulated expenditure= 3/4x1,200,000=$ 900.000

June 30

construction expoenditure= 800,000

outstanding interest= 6/12=1/2

Accumulated expenditure= 1/2 x 800000= $400000

September 30

construction expenditure=600,000

outstanding interest=3/12

Accumulated expenditure- 1/4 x600,000=$150,000

December 31

Construction expenditure= 400,000

outstanding interest =0/12

Accumulated expenditure=0

Total of the average accumulated expenditure  =$2,050,000

Weighted average on other debts  

Bonds interest of  12% for $5,000,000= $600,000

Long term note = 8% for $3,000,000 =240,000

Total = $840,000

weighted average =$840,000/(3,000,000 + 5,000,000)

= 840,000/8,000,000= 10.5%

Amount of difference =average accumulated expenditure- construction loan

=$2,050,000- $1,500,000

=$550,000

Interest on difference =10.5/100 x $550,000

=$57,750

Interest on amount on construction loan= 8/100 x  $1,500,000

= $120,000

Amount of interest capitalized  = interest on construction loan + interest on amount obtained from difference of accumulated expenditure and construction loan = $120,000+ $57,750 = $177,750

Final answer:

The amount of interest capitalized for the Highlands Company in 2021 using the specific interest method is $164,000, calculated based on the interest rate of the specific construction loan and the timing of construction expenditures.

Explanation:

When a company incurs costs for constructing an asset for its own use, it can capitalize interest as part of the asset's cost. For the Highlands Company, the amount of interest to be capitalized for 2021 using the specific interest method must be calculated based on the construction loan specifically taken for the asset.

Since the only loan that was taken specifically for the construction was the $1,500,000 at 8%, the interest on this loan is what should be capitalized. The interest cost for a full year on this loan would be $120,000 (which is $1,500,000 × 8%). However, because construction was ongoing throughout the year, we only capitalize interest for the actual amounts spent on construction until each date, for the duration those amounts were outstanding.

The timeline of expenditures is as follows:

January 1: $600,000 - entire yearMarch 31: $1,200,000 - 9 monthsJune 30: $800,000 - 6 monthsSeptember 30: $600,000 - 3 monthsDecember 31: $400,000 - 0 months (since the year ends on this date)

To calculate the interest for each period:

$600,000 for 12 months: $600,000 × 8% = $48,000$1,200,000 for 9 months (3/4 of the year): $1,200,000 × 8% × 3/4 = $72,000$800,000 for 6 months (1/2 of the year): $800,000 × 8% × 1/2 = $32,000$600,000 for 3 months (1/4 of the year): $600,000 × 8% × 1/4 = $12,000

When we add up each of these amounts, the total interest capitalized for 2021 is $164,000 ($48,000 + $72,000 + $32,000 + $12,000).

When we add up each of these amounts, the total interest capitalized for 2021 is $164,000 ($48,000 + $72,000 + $32,000 + $12,000).

An investment firm recommends that a client invest in bonds rated​ AAA, A, and B. The average yield on AAA bonds is 4​%, on A bonds 5​%, and on B bonds 8​%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each type of bond under the following​ conditions? A. The total investment is ​$28 comma 000​, and the investor wants an annual return of ​$1 comma 460 on the three investments. B. The values in part A are changed to ​$38 comma 000 and ​$1 comma 990​, respectively.

Answers

Answer:

let A = AAA bonds that yield 4%

let a = A bonds that yield 5%

let B = B bonds that yield 8%

A = 2B

A)

A + a + B = 28,000 (replace A with 2B)

0.04A + 0.05a + 0.08B = 1,460 (replace A with 2B)

2B + a + B = a + 3B = 28,000 ⇒ a = 28,000 - 3B

0.08B + 0.05a + 0.08B = 0.05a + 0.16B = 1,460 (replace a with 28,000 - 3B)

0.05(28,000 - 3B) + 0.16B = 1,400 - 0.15B + 0.16B =1,460

1,400 + 0.01B = 1,460

0.01B = 1,460 - 1,400 = 60

B = 60 / 0.01 = $6,000

A = $12,000

a = $28,000 - $6,000 - $12,000 = $10,000

AAA bonds = $12,000

A  bonds = $10,000

B bonds = $6,000

B)

A + a + B = 38,000 (replace A with 2B)

0.04A + 0.05a + 0.08B = 1,990 (replace A with 2B)

2B + a + B = a + 3B = 38,000 ⇒ a = 38,000 - 3B

0.08B + 0.05a + 0.08B = 0.05a + 0.16B = 1,990 (replace a with 28,000 - 3B)

0.05(38,000 - 3B) + 0.16B = 1,900 - 0.15B + 0.16B =1,990

1,900 + 0.01B = 1,990

0.01B = 1,990 - 1,900 = 90

B = 90 / 0.01 = $9,000

A = $18,000

a = $38,000 - $9,000 - $18,000 = $11,000

AAA bonds = $18,000

A  bonds = $11,000

B bonds = $9,000

The board of directors of Weston Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2007. The dividend is to be paid on August 15, 2007, to stockholders of record on July 31, 2007. The correct entry to be recorded on August 15, 2007, will include a Group of answer choices debit to Retained Earnings. credit to Retained Earnings. credit to Dividends Payable. debit to Dividends Payable.

Answers

Answer:

The correct option is debit to Dividends Payable

Explanation:

On the declaration date of dividends,the appropriate entries in the books of accounts would be to debit retained earnings since dividends are appropriated from retained earnings and a credit to dividends payable as an outstanding obligation owed to shareholders.

On payment date(August 15,2007),a debit would be passed in the dividends payable account and a credit sent to cash/bank account as an outflow of cash from the business to stockholders.

Suppose you examine the central bank’s balance sheet and observe that since the previous day, reserves had fallen by $100 million. In addition, on the asset side of the central bank’s balance sheet, securities had fallen by $100 million. Do you think the central bank was aiming to increase, decrease, or maintain the size of the money supply by carrying out the changes described to its balance sheet

Answers

Answer:

The Central Bank is trying to increase money supply.

Explanation:

When the Central Bank makes moves to increase reserves, it means that it is simply trying to mop up excess cash from the economy to fight inflation. Spiking inflation means that the power of a currency is gradually being eroded. The Central Bank cannot allow this to happen so it hits the "Reduce Money In Circulation" button. It does this by reviewing upwards, the money reserves which commercial banks must hold with the Central Bank.  

It can also increase the rate at which it lends to the Commercial Banks and Investment houses. Commercial Banks, in turn, transfer the additional cost of borrowing to businesses who will seek loans. This slows down the rate at which money is pumped into the economy.

In the question, however, we notice that the Central Bank has enervated its reserves. This means that it is pumping more money into the economy. This economic move may have been executed to prevent the economy from slipping into a recession or simply to stimulate the economy.

In the short run, increased money supply means, businesses have more access to funds from commercial banks. More funds mean, more investment. Increased investment spending means the businesses will need to expand operations, hire more staff, and the multiplier effect goes on and on.

Cheers!

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 130 100 % Variable expenses 78 60 % Contribution margin $ 52 40 % The company is currently selling 6,000 units per month. Fixed expenses are $184,000 per month. The marketing manager believes that a $5,800 increase in the monthly advertising budget would result in a 200 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change

Answers

Answer:

The company's monthly net operating income increases $4,600

Explanation:

The company is currently selling 6,000 units per month:

Total sales = $130 x 6,000 = $780,000

Total Variable expenses = $78 x 6,000 = $468,000

Net operating income = Total sales - Total Variable expenses - Fixed expenses = $780,000 - $468,000  - $184,000 = $128,000

If Kuzio Corporation increases in the monthly advertising budget of $5,800:

Total sales = $130 x 6,200 = $806,000

Total Variable expenses = $78 x 6,200 = $483,600

Fixed expenses = $184,000 + $5,800 = $189,800

Net operating income = $806,000 - $483,600 - $189,800 = $132,600

The company's monthly net operating income increases = $132,600 - $128,000 = $4,600

Final answer:

Increasing advertising by $250 would result in a profit increase of $2,920.

Explanation:

Your average variable cost (AVC) is $16 per unit.

Your elasticity of demand with respect to advertising is 0.5.

If you increase advertising by $250, your profit will increase by $2,920 (after accounting for the increase in advertising costs).

On January 1 Primary Manufacturing had a beginning balance in WorkminusinminusProcess Inventory of $ 80 comma 700 and a beginning balance in Finished Goods Inventory of $ 21 comma 000. During the​ year, Primary incurred manufacturing costs of $ 353 comma 000. In​ addition, the following transactions occurred during the​ year: Job Aminus12 was completed for a total cost of $ 125 comma 000 and was sold for $ 126 comma 000. Job Aminus13 was completed for a total cost of $ 203 comma 000 and was sold for $ 212 comma 000. Job Aminus15 was completed for a total cost $ 62 comma 000 but was not sold as of yearminusend. The Manufacturing Overhead account had an unadjusted credit balance of $ 10 comma 000​, and was adjusted to zero at yearminusend. What was the final balance in the Cost of Goods Sold​ account?

Answers

Answer:

$318,000

Explanation:

The formula to compute the final balance in the cost of goods sold is shown below:

= Total cost of Job A -12 + Total cost of Job A -13 - unadjusted credit balance of manufacturing overhead account

= $125,000 + $203,000 - $10,000

= $318,000

The cost of goods sold refers to the direct cost that includes the direct material , direct labor cost etc

       

Final answer:

The final balance in the Cost of Goods Sold account for Primary Manufacturing for the year is $328,000, which includes the costs of Job A-12 and Job A-13 which were sold within the year.

Explanation:

To calculate the final balance in the Cost of Goods Sold (COGS) account, we need to look at the cost of Job A-12 and Job A-13, both of which were completed and sold within the year. The total cost of these jobs is $125,000 (for Job A-12) plus $203,000 (for Job A-13) which comes to $328,000. This amount represents the Cost of Goods Sold (COGS) for the year as it includes the manufacturing costs of the goods that were sold. The Job A-15, which was not sold, is not included in the COGS but will be part of the ending inventory of work in process or finished goods.

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Investment in depreciable equipment$560,000 Annual net cash flows $82,000 Life of the equipment 16years Salvage value$0 Discount rate 9% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment would be: (Round your answer to 1 decimal place.) Noreen_5e_Rechecks_2019_10_16 Multiple Choice 0.1 years 1.0 years 4.8 years 6.8 years

Answers

Answer:

The correct option is the last one,6.8 years

Explanation:

The payback period is the length of time it takes for an investor to realize the initial investment in a project,in simple terms, it is the time horizon wherein the project pays back the capital investment locked in it.

After the payback period,the project begins with return on investment phase,a phase where cash flows received are excess over and above the initial capital outlay.

Payback=initial investment/annual cash inflow

initial investment is $560,000

annual net cash flow is $82,000

payback period=$560,000/$82,000=6.8 years

Kim will only buy cars from Japanese automakers because she thinks cars made in the United States are of inferior quality. She has this belief even though she has never studied the ratings of cars made in the United States. What type of communication barrier does this represent?

Answers

Answer:

Perception barrier

Explanation:

Perception barrier in communication occurs when the preconceived idea that a person holds about a particular situation influences his choice of decision.

In such a situation , the perceiver makes a less effort in arriving at a choice as he already has a formed opinion as a driver of his choice which can always lead to a wrong choice except in a few cases.

This explains Kim's action as she is already biased about cars from United states.

Lakeland, Inc., is a U.S.‑based MNC with a subsidiary in Mexico. Its Mexican subsidiary needs a one‑year loan of 10 million pesos for operating expenses. Since the Mexican interest rate is 40 percent, Lakeland is considering borrowing dollars, which it would convert to pesos to cover the operating expenses. By how much would the dollar have to appreciate against the peso to cause such a strategy to backfire? (The one‑year U.S. interest rate is 6%.)

Answers

Answer:

The dollar have to apprentice 32% against the peso.

Explanation:

According to the scenario, computation of the given data are as follow:-

We can calculate the Expected Future Exchange Return by using following formula:-

Expected Future Exchange Return= 1 - (1 + Mexican Interest Rate) ÷ ( 1 + US Interest Rate)

= 1 - ( 1 + 0.4) ÷ ( 1 + 0.06 )

= 1 - 1.32

= 0.32 or 32%

According to the Analysis, the dollar have to apprentice 32% against the peso for the given strategy to backfire

were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from retained earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Quigley's WA

Answers

Answer:

8.15%

Explanation:

The computation of the WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of  common stock) × (cost of common stock)

= (0.35 × 6.50%) × ( 1 - 40%) +  (0.10 × 6%) +  (0.55 × 11.25%)

= 1.365% + 0.6% + 6.1875%

= 8.15%

We simply multiplied the weighted of each capital structure with its cost so that the weighted cost of capital could come

To find Quigley Company's WACC, we calculate the weighted costs of debt, preferred stock, and common equity. Considering the proportions and costs provided, Quigley's WACC is 8.15%.

To calculate Quigley Company's Weighted Average Cost of Capital (WACC), we need to weigh the cost of each component by its proportion in the target capital structure. Given the information:

Debt: 35%Preferred Stock: 10%Common Equity: 55%Interest rate on new debt: 6.50%Yield on preferred: 6.00%Cost of common equity from retained earnings: 11.25%Tax rate: 40%

Steps to Calculate Quigley's WACC:

Cost of Debt after Tax:

Formula: Cost of Debt * (1 - Tax Rate)

Calculation: 6.50% * (1 - 0.40) = 3.90%

Component Costs:

Debt: 3.90%

Preferred: 6.00%

Common Equity: 11.25%

Formula: (Weight of Debt * Cost of Debt after Tax) + (Weight of Preferred * Cost of Preferred) + (Weight of Common Equity * Cost of Common Equity)

Calculation: (0.35 * 3.90%) + (0.10 * 6.00%) + (0.55 * 11.25% = 1.365% + 0.60% + 6.1875%= 8.1525%

Therefore, Quigley Company's WACC is 8.15%

Jonas is a 60% owner of Ard, an S corporation. At the beginning of the year, his stock basis is zero. Jonas's basis in a $33,200 loan made to Ard and evidenced by Ard's note has been reduced to $0 by prior losses. During the year, Jonas's net share of Ard's taxable income is $16,600. At the end of the year, Ard makes a $24,900 cash distribution to Jonas. After these transactions, what is Jonas's basis in his stock, and what is his basis in the debt? What is Jonas's recognized capital gain?

Answers

Answer:

Capital gain $24,900

Explanation:

Jonas's Stock basis $33,200

Less $8,300

Capital gain $24,900

$24,900 cash distribution - Net share of Ard's taxable income $16,600= $8,300

Therefore Jonas's recognized capital gain

of $24,900

A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Avoidable Expenses Unavoidable Expenses Cost of goods sold$56,000 Direct expenses 9,250 $1,250 Indirect expenses 470 1,600 Service department costs 6,000 1,430 Should the division be eliminated

Answers

Answer:

The electric division should be kept

Explanation:

The computation of given question is shown below:-

Electric guitar division          Kept           Eliminated

Sales                                      $72,000    $0

Expenses

Cost of goods sold              $56,000      0

Direct expenses                   $9,250       $1,250

Indirect expenses                 $470          $1,600

Service department cost      $6,000      $1,430

Total expenses                      $71,720     $4,280

Net income (loss)                    $280         ($4,280)

                                         ($72,000 - $71,720)

Therefore the electric division should be kept

The following data relates to units shipped and total shipping expense for the Adams Company. Month Units shipped Total Shipping Expense January 3 $1,300 February 6 $1,600 March 4 $1,400 April 5 $1,500 May 7 $1,700 June 8 $1,800 July 2 $1,200 Using the high-low method, provide the following. SHOW WORK. a. Variable cost per unit b. Total fixed costs c. The cost formula for shipping expense

Answers

Answer:

Instructions are below.

Explanation:

Giving the following information:

Month - Units shipped - Total Shipping Expense

January: 3 - $1,300

February: 6 - $1,600

March: 4 - $1,400

April: 5 - $1,500

May: 7 - $1,700

June: 8 - $1,800

July: 2 - $1,200

First, we need to calculate the unitary variable cost using the following formula:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (1,800 - 1,200) / (8 - 2)

Variable cost per unit=  100

Now, we can calculate the fixed costs:

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 1,800 - (100*8)

Fixed costs= 1,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 1,200 - (100*2)

Fixed costs= $1,000

Finally, the total cost formula:

Total cost= 1,000 + 100X

X= units shipped

At the beginning of the year, manufacturing overhead for the year was estimated to be $1,052,700. At the end of the year, actual direct labor-hours for the year were 36,400 hours, the actual manufacturing overhead for the year was $990,000, and manufacturing overhead for the year was overapplied by $65,600. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: (Do not round intermediate calculation.)

Answers

Answer:

36,300 hours

Explanation:

For computing the estimated direct labor hours first we need to find out the manufacturing overhead applied and predetermined overhead applied which is shown below:-

Manufacturing overhead applied = Actual Overhead + Over applied Overhead

= $990,000 + $65,600

= $1,055,600

and

Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor hours

= $1,055,600 ÷ 36,400 hours

= 29

So,

Estimated direct labor hours = Estimated total manufacturing Overhead ÷ Predetermined overhead rate

= $1,052,700 ÷ 29

= 36,300 hours

So, for computing the estimated direct labor hours we simply applied the above formula.

Markland First National Bank of Rolla utilizes Kanban techniques in its check processing facility. The fol-lowing information is known about the process. Each Kanban container can hold 50 checks and spends 24 minutes a day in processing and 2 hours a day in materials handling and waiting. Finally, the facility operates 24 hours per day and utilizes a policy variable for unforeseen contingencies of 0.25.


If there are 23 kanban containers in use the current daily demand of the check processing facility is ______ units

Answers

Final answer:

The current daily demand of the check processing facility using Kanban techniques is 22,750 units.

Explanation:

The current daily demand of the check processing facility, operating on Kanban techniques, can be calculated using the formula: Kanban Quantity = Demand x Lead Time x (1 + Policy Variable). In this case:

The Demand is the number of units that need to be processed daily.The Lead Time is the amount of time a Kanban container spends in processing and materials handling (24 minutes for processing + 120 minutes for handling = 144 minutes in total).The Policy Variable is an additional amount of time added for unforeseen contingencies, which is 0.25 in this case.

Given that there are 23 Kanban containers in use and each kanban container can hold 50 checks, it suggests that the facility can process 1,150 checks (23 kanbans * 50 checks) during the sum of the processing and waiting time (144 minutes) in a day. Therefore, considering the facility operates 24 hours, the current daily demand would be (1,150 checks * (24*60 minutes/144 minutes) * (1+0.25)) = 22,750 units.

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Airbolt Avionics makes aircraft instrumentation. Their basic navigation radio requires $ 120 in variable costs and requires $ 3 comma 000 per month in fixed costs. If it processes the radio further to enhance its​ functionality, it will require an additional $ 20 per unit of variable costs and $ 400 per month in fixed costs. The marketing manager believes the sales price of the radio can be increased from $ 270 to $ 300. In making this​ decision, the amount of additional fixed costs per month is a relevant cost.

Answers

Answer:

regular sales price $270, total sales per month = 10 units

basic manufacturing costs:

variable cost per unit $120

fixed costs $3,000

if further processed, sales price $300

if further processed:

additional variable cost $20 per unit

additional fixed costs $400

At what sales price level would the​ new, improved radio begin to improve operating​ earnings?

                                    sales price $270                  

revenue                            $2,700

variable costs                  -$1,200

fixed costs                       -$3,000

operating income           -$1,500

                                    sales price $300                  

revenue                            $3,000

variable costs                  -$1,400

fixed costs                       -$3,400

operating income            -$1,800

Since relevant costs increase by $60 per unit (= $20 variable costs and $400/10 in fixed costs), then the sales price should increase more than $60 in order to lower the company's losses.

If the company wants to make a profit, then it should increase its sales price by more than $180 per unit. If the radio is processed further, in order to break even its sales price should be $480 per unit.

                                    sales price $480                  

revenue                            $4,800

variable costs                  -$1,400

fixed costs                       -$3,400

operating income                 $0

Any sales price above $480 will result in an operating profit.

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5 per direct labor-hour; the budgeted fixed manufacturing overhead is $90,000 per month, of which $16,500 is factory depreciation. If the budgeted direct labor time for November is 8,500 hours, then the total budgeted manufacturing overhead for November is:

Answers

Answer:

The total budgeted manufacturing overhead for November is $125,000

Explanation:

The total budgeted manufacturing overhead for November comprises of the budgeted variable manufacturing overhead of $5 per direct labor(where total labor hours are 8,500) plus the budgeted fixed manufacturing overhead of $90,000 for the month.

Budgeted variable manufacturing overhead($5*8500)        $35,000

Budgeted fixed manufacturing overhead                               $90,000

Total budgeted manufacturing overhead for November       $125,000

The overhead projected to be incurred in November is $125,000

Answer:

$132,500

Explanation:

Overhead are all the indirect expense of the business. Manufacturing overhead are all the indirect expenses which incurred for the manufacturing purpose of the product. All the variable and fixed indirect costs are included in it e.g indirect material, utilities etc.

Manufacturing Overhead

Variable manufacturing overhead ($5 x 8,500)   $42,500

Fixed manufacturing overhead                             $90,000

Total manufacturing overhead cost                     $132,500

The following selected information is from Princeton Company’s comparative balance sheets. At December 31 2017 2016 Common stock, $10 par value $ 131,000 $ 126,000 Paid-in capital in excess of par 593,000 355,000 Retained earnings 339,500 313,500 The company’s net income for the year ended December 31, 2017, was $61,000. 1. Complete the T-accounts to calculate the cash received from the sale of its common stock during 2017. 2. Complete the T-account to calculate the cash paid for dividends during 2017.

Answers

Answer:

Princeton Company

The T-accounts are attached.

Explanation:

They can also be obtained as follows:

1. T-accounts to calculate the Cash received from the sale of its common stock during 2017:

Common Stock & APIC

Closing balance of common stock = $131,000

Closing balance of APIC = $593,000

less Opening balance of common stock = $126,000

less Opening balance of APIC = $355,000

Cash collected = $243,000

2.  T-account to calculate the cash paid for dividends during 2017:

Retained Earnings:

Opening balance = $313,500

Add net income = $61,000

Less closing balance = $339,500

Cash Dividends paid = $35,000

Acme Enterprises began the new year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts payable balance of ______. $4,500 $5,500 $11,000 $6,000 $1,000

Answers

Answer:

Acme's current balance of accounts payable is $6000

Explanation:

The closing balance of accounts payable can be calculated using the opening balance and adjusting the changes during the period to the opening balance.

The closing balance can thus be calculated as:

Closing balance = Opening balance + Credit purchases - Payment to Accounts payable

Closing balance = 3000 + 4000 - 1000

Closing balance = $6000

What is the broad term that refers to all other terms listed below. The term can apply to all divisions and departments​ (such as​ "We are an equal opportunity​ employer"), or to a single department​ ("Employees in this department must take at least one training and development course each​ year").


A. Rules

B. Methods

C. Policies

D. Guidelines

E. Procedures

Answers

Answer:

C. Policies

Explanation:

Policy is the broad term that can apply to all divisions and departments​ (such as​ "We are an equal opportunity​ employer"), or to a single department​ ("Employees in this department must take at least one training and development course each​ year").

Policy can be defined as the set of rules, ideas and principles of action that are adopted to guide an organization.

10. The Marshall Variety Store uses the lifo retail inventory method at stable prices. The following information is available as of January 2, 2021: Cost Retail Inventory, January 2, 2021 $186,000 $270,000 Purchases 560,000 700,000 Sales 760,000 Net Markups 160,000 Net Markdowns 60,000 What was the inventory value as of December 31, 2021 using the lifo-retail inventory method

Answers

Answer:

$310,000

Explanation:

Beginning inventory:       $186,000 (cost); $ 270,000 (retail);

                                         $186,000 : $270,000 cost to retail ⇒ 1.45

Purchases:                        $560,000 (cost); $700,000 (retail);

                                         $560,000 : $700,000 cost to retail ⇒ 1.25

Net markups:                   $n/a (cost); $160,000 (retail);

Net markdowns:              $ n/a (cost); $60,000 (retail);

Sales:                                $ n/a (cost); $760,000 (retail).

                                 

the cost of goods sold (COGS) using LIFO = ($700,000 / 1.25) + ($60 / 1.4516) = $560,000 + $41,333.33 = $601,333.33

ending inventory = [($186,000 - $41,333.33) x 1.4516] + $160,000 - $60,000 = $210,000 + $160,000 - $60,000 = $310,000

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