Answer:
B. False
Explanation:
I majored in Business
Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $476,000 and $1,650 respectively, at December 31, 2020. During 2021, Calistoga's credit sales and collections were $315,000 and $307,000, respectively, and $1,880 in accounts receivable were written off. Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2021, is:
Answer:
$1,345
Explanation:
Calculation to determine what Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2021, is
First step is to calculate the Expense amount
Expense=Credit sales $315,000* .5%
Expense=$1,575
Second step is to calculate the Allowance
Allowance 12/31/2020 $1,650
Less Write-offs(1,880)
Allowance ($ 230)debit
Now let calculate the final balance in its allowance for uncollectible accounts
December 31, 2021 allowance for uncollectible accounts= ($230) + $1,575
December 31, 2021 allowance for uncollectible accounts=$1,345
Therefore Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2021, is $1,345
Type the correct answer in the box. Spell all words correctly.
Why is the cost of goods sold account part of a trading business only?
The cost of goods sold account is part of a trading business, but not seen in the income statement of a service business. This is because in a
service business, no
goods are sold to the consumers.
Answer:
Indeed, the cost of goods sold account is part of a trading business, but not seen in the income statement of a service business, because in a service business, no material goods are sold to the consumers. In this way, contrary to what happens in the sale of goods, in the sale of services the seller does not offer a material with a previous production cost to the buyer, but rather offers the performance of a certain task, with which there is no material component in the offer, but rather an execution of an act and the knowledge of how to carry out said execution by the person providing the service.
Possible misstatements that may occur during the cash receipts process result from cash receipts being received, but not recorded (which could facilitate embezzlement). A control technique that is used to mitigate the risk of such misstatements is to segregate the duties of the accounts receivable department, general ledger accounting records, and cash receipts. The employee who completed each duty is required to sign his/her initials, and evidence of this has been provided for you in the Accounts_Receivable file. In each transaction, proper segregation of duties is accomplished when no two duties have been completed by the same person. Use IDEA and the information from Roger Company Accounts_Receivable file to determine in which transactions segregation of duties was not properly implemented.
Answer:
There should be strong internal controls implemented and segregation of duties in the finance department.
Explanation:
There is lack of internal controls present in the company which may lead to fraud or errors. The employees assigned to record the transaction are not recording all the cash receipts and are missing some of the cash receipts which can cause errors during reconciliation. The sub divisions of finance department must be segregated and there should be a supervisor who should be responsible to review all the work done by these departments.
At the beginning of 2020, Beerbo acquired a mine for $970,000. Of this amount, $100,000 was ascribed to the land value (the remaining portion was ascribed to the mine). Surveys conducted by geologists have indicated that approximately 12,000,000 units of ore appear to be in the mine. Beerbo incurred $170,000 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use (when all of the minerals have been removed) is $40,000. During 2020, 2,500,000 units of ore were extracted and 2,100,000 of these units were sold. What is the amount extracted in 2020
Answer:
$225,000
Explanation:
Depletion rate = [Mine cost - Land value + Obligation to prepare the land for an alternative + Development cost] / Total number of ore extracted
Depletion rate = [$970,000 - $100,000 + $40,000 + $170,000] / $12,000,000
Depletion rate = $1,080,000/$12,000,000
Depletion rate = $0.09
Amount extracted in 2020 = Unit of ore extracted in 2020 / Depletion rate
Amount extracted in 2020 = 2,500,000 units * $0.09
Amount extracted in 2020 = $225,000
Instructions: Please make sure that you show all your work when solving the problems. Feel free to make any assumptions whenever you feel necessary. Just make sure that you clearly state your assumptions.
Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%.
a. Given that the last dividend paid was $0.5 and the current market price of the stock is $15, what growth rate does the market expect for MC, Co?
b. At what price would the analysts value the stock under their own expectations?
c. Suppose 5 years have gone by and the company has to make a decision on how to move forward. It can either pay out all earnings as dividends without considering any growth opportunities, or choose a growth strategy where the company will expand into new lines of business in global markets. If the management chooses this strategy, the payout ratio will be reduced down to 20% from 35%, and the company will be able to maintain a growth rate of 7% forever. Which strategy should the management choose to maximize shareholder value?
Answer:
Explanation:
From the given information:
The current price = [tex]\dfrac{Dividend(D_o) \times (1+ Growth \ rate) }{\text{Cost of capital -Growth rate}}[/tex]
[tex]15 = \dfrac{0.50 \times (1+ Growth rate)}{8\%-Growth rate}[/tex]
[tex]15 \times (8 -Growth \ rate) = 0.50 +(0.50 \times growth \ rate)[/tex]
[tex]1.20 - (15 \times Growth \ rate) = 0.50 + (0.50 \times growth \ rate)[/tex]
[tex]0.70 = (15 \times growth \ rate) \\ \\ Growth \ rate = \dfrac{0.70}{15.50} \\ \\ Growth \ rate = 0.04516 \\ \\ Growth \ rate \simeq 4.52\% \\ \\[/tex]
2. The value of the stock
Calculate the earnings at the end of 5 years:
[tex]Earnings (E_o) \times Dividend \ payout \ ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%} \\ \\ = \$1.42857[/tex]
[tex]Earnings (E_5) year \ 5 = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year \ 5 = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \ 5 = \$2.51763[/tex]
Terminal value year 5 = [tex]\dfrac{Earnings (E_5) \times (1+ Growth \ rate)}{Interest \ rate - Growth \ rate}[/tex]
[tex]=\dfrac{\$2.51763\times (1+0.04516)}{8\%-0.04516}[/tex]
=$75.526
Discount all potential future cash flows as follows to determine the stock's value:
[tex]\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 +Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no\ of\ years} }[/tex]
[tex]+ \dfrac{Terminal\ Value }{(1+interest \ rate )^{no \ of \ years}} \Bigg)[/tex]
[tex]\implies \bigg(\dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}} + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$75.526}{(1+8\% )^{5}} \bigg )[/tex]
[tex]\implies \bigg(\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$75.526}{1.4693} \bigg)[/tex]
=$ 54.1945
As a result, the analysts value the stock at $54.20, which is below their own estimates.
3. The value of the stock
Calculate the earnings at the end of 5 years:
[tex]Earnings (E_o) \times Dividend payout ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%}\\ \\ = \$1.42857[/tex]
[tex]Earnings (E_5) year \ 5 = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year \ 5 = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \ 5 = \$2.51763 \\ \\[/tex]
Terminal value year 5 =[tex]\dfrac{Earnings (E_5) \times (1+ Growth \ rate)\times dividend \ payout \ ratio}{Interest \ rate - Growth \ rate}[/tex]
[tex]=\dfrac{\$2.51763\times (1+ 7 \%) \times 20\%}{8\%-7\%}[/tex]
=$53.8773
Discount all potential cash flows as follows to determine the stock's value:
[tex]\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 + Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no \ of\ years} }+ \dfrac{Terminal \ Value }{(1+interest \ rate )^{no \ of \ years }} \bigg)[/tex]
[tex]\implies \bigg( \dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}} + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$53.8773}{(1+8\% )^{5}} \bigg)[/tex]
[tex]\implies \bigg (\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$53.8773}{1.4693} \bigg)[/tex]
=$39.460
As a result, the price is $39.460, and the other strategy would raise the value of the shareholders. Not this one, since paying a 100% dividend would result in a price of $54.20, which is higher than the current price.
Notice that the third question depicts the situation after 5 years, but the final decision will be the same since we are discounting in current terms. If compounding is used, the future value over 5 years is just the same as the first choice, which is the better option.
The presumption in the second portion is that after 5 years, the steady growth rate would be the same as measured in the first part (1).
Gibson Company makes fine jewelry that it sells to department stores throughout the United States. Gibson is trying to decide which of the two bracelets to manufacture. Cost data pertaining to the two choices follow. Bracelet A Bracelet B Cost of materials per unit $ 29 $ 45 Cost of labor per unit 33 33 Advertising cost per year 8,100 6,000 Annual depreciation on existing equipment 6,000 5,600 Required Identify the fixed costs and determine the amount of fixed cost for each product. Identify the variable costs and determine the amount of variable cost per unit for each product. Identify the avoidable costs and determine the amount of avoidable cost for each product.
Answer:
Gibson Company
Fixed costs for each product:
Bracelet A Bracelet B
Advertising cost per year 8,100 6,000
Annual depreciation on
existing equipment 6,000 5,600
Total fixed costs $14,100 $11,600
Variable costs:
Bracelet A Bracelet B
Cost of materials per unit $ 29 $ 45
Cost of labor per unit 33 33
Variable cost per unit $ 62 $ 78
Avoidable costs:
Bracelet A Bracelet B
Variable cost per unit $ 62 $ 78
Explanation:
a) Data and Calculations:
Bracelet A Bracelet B
Cost of materials per unit $ 29 $ 45
Cost of labor per unit 33 33
Advertising cost per year 8,100 6,000
Annual depreciation on
existing equipment 6,000 5,600
NB:
Advertising cost can be avoided if production did not take place, just as all variable costs can be avoided without production.
Joint products A and B emerge from common processing that costs $116,000 and yields 4,000 units of Product A and 2,800 units of Product B. Product A can be sold for $280 per unit. Product B can be sold for $100 per unit. How much of the joint cost will be assigned to Product A if joint costs are allocated on the basis of relative sales values
Answer:
Apportioned joint cost to A=$92,800
Explanation:
Joint costs are the costs incurred up until the split-off where two or more products result from the same production process. These common costs need to be apportioned among the joint products using any of the following basis:
physical unitsRelative sales value basis.The relative value basis apportions joint costs using the proportion of product individual sales value to the the total sales value.
Total sales value = (280×4,000) + (100×2,800) =1400000
Apportioned joint cost to A =(1,120,000/1,400,000)× 116,000=92800
Apportioned joint cost to A=$92,800
A firm is operating in the United States with only two other competitors in the industry. a. It is likely this industry would be characterized as: multiple choice 1 monopolistically competitive. perfectly competitive. oligopoly. pure monopoly. b. Firms in this industry will likely earn: multiple choice 2 a normal profit. an economic profit. an economic loss. c. If foreign firms begin supplying the product, increasing the number of competitors, it is likely that: multiple choice 3 economic profits will fall.
Answer:
a. oligopoly.
b. an economic profit.
c. economic profits will fall.
Explanation:
An oligopoly can be defined as a market structure comprising of a small number of firms (sellers) offering identical or similar products, wherein none can limit the significant influence of others.
Hence, it is a market structure that is distinguished by several characteristics, one of which is either similar or identical products and dominance by few firms.
The characteristics of an oligopolistic market structure are;
I. Mutual interdependence between the firms.
II. Market control by many small firms.
III. Difficult entry to new firms.
Hence, a firm operating in the United States of America with only two other competitors in the industry is likely to be an industry that would be characterized as oligopoly.
Additionally, business firms operating in this industry (oligopolistic market) will likely earn an economic profit. Also, if foreign business firms begin supplying the product, increasing the number of competitors, it is likely that economic profits will fall because the industry is now being competitive and controlled by other business firms.
In economics, market structure refers to how different industries are distinguished depending on the degree and form of product and services rivalry. It's based on the features that influence the outcomes and behaviors of businesses in a given market.
a) An oligopoly is a business that operates in the United States with only two other competitors in the same industry.
Reason:
An oligopoly is a market structure with a small number of enterprises and high entry barriers. A competitive environment in which there are just a few vendors reveals to be Oligopoly because there are only two competitors available in the business.
b) Oligopolistic businesses will almost certainly make an economic profit.
Reason:
In an oligopoly, all firms would have to work together to raise prices and make a bigger profit. The bulk of oligopolies form in industries where goods are essentially homogeneous and give essentially the same advantage to customers.
c) Economic earnings are expected to diminish or fall if international enterprises begin to supply the product, increasing the number of competitors.
Reason:
As the supply curve changes to the right, the market price begins to fall, and as a result, existing and new enterprises' economic earnings fall. Due to the entry of new enterprises, which pulls down the market price, economic profit is zero in the long term.
For more information regarding the oligopoly market, refer to the link: https://brainly.com/question/14285126?referrer=searchResults
Ramirez's adjusted basis in a passive activity is $45,000 at the beginning of the year. His loss from the activity for the current year is $14,200. Ramirez has wages of $65,000 and dividend income of $300. At year-end, Ramirez has the following:
1. Adjusted basis in the passive activity: $______
2. At-risk amount in the passive activity: $________
3. A suspended passive loss: $_______
Answer:
1. $30,800
2. $30,800
3. $14,200
Explanation:
1. Calculation to determine the Adjusted basis in the passive activity
Using this formula
Adjusted basis in the passive activity=Beginning adjusted basis in a passive activity-Loss activity for the current year
Adjusted basis in the passive activity=$45,000-$14,200
Adjusted basis in the passive activity=$30,800
Therefore Adjusted basis in the passive activity is $30,800
2. Calculation to determine At-risk amount in the passive activity
Using this formula
At-risk amount=Beginning adjusted basis in a passive activity-Loss activity for the current year
Let plug in the formula
At-risk amount=$45,000-$14,200
At-risk amount=$30,800
Therefore At-risk amount in the passive activity is $30,800
3. Based on the information given we were told that His loss amount from the activity for the current year was the amount of $14,200 which means that the suspended PASSIVE LOSS will be $14,200.
Read the scenario and answer the following questions:
Maria works for a toy manufacturer and is responding to the claim of a disgruntled customer. The customer is upset because the Interactive toy he purchased for his child stopped working the day of the purchase. The customer tried replacing the batteries, but that would not fix the problem. Maria knows that there have been issues with this product, and she decides to write an adjustment message. Which of the following sentences would be appropriate for Maria to include in her adjustment message?
a. I wasn't personally responsible for the defect, but I'll see what I can do.
b. Perhaps your child did something to the toy to cause it to stop working.
c. You can use the enclosed voucher to purchase a new product of your choice.
d. I promise this will never happen again.
Answer: You can use the enclosed voucher to purchase a new product of your choice
Explanation:
An adjustment message simply refers to the response that is written with respect to a claim letter which was made against a business or organization.
The appropriate sentence that Maria should include in her adjustment message will be that "You can use the enclosed voucher to purchase a new product of your choice".
This will help calm the customer down and the customer will be happy to know that she can make another purchase with the voucher.
Other options such as "I wasn't personally responsible for the defect, but I'll see what I can do", and "Perhaps your child did something to the toy to cause it to stop working" will make the customer angrier.
Therefore, the correct option is C.
Suppose two types of firms wish to borrow in the bond market. Firms of type A are in good financial health and are relatively low risk. The appropriate premium over the risk-free rate for lending to these firms is 2%. Firms of type B are in poor financial health and are relatively high risk. The appropriate premium over the risk-free rate for lending to these firms is 6%. As an investor, you have no other information about these firms except that type A and type B firms exist in equal numbers.
A. At what interest rate would you be willing to lend if the risk-free rate were 6%?
B. Would this market function well? What type of asymmetric information problem does this example illustrate?
Answer:
A. I would be willing to lend at average rate of 10%
B-1. No, this market will not function well.
B-2. This example illustrates an adverse selection problem.
Explanation:
A. At what interest rate would you be willing to lend if the risk-free rate were 6%?
Appropriate interest rate for type A firm bond = Premium over the risk-free rate of Type A firm + Risk-free rate = 2% + 6% = 8%
Appropriate interest rate for type B firm bond = Premium over the risk-free rate of Type B firm + Risk-free rate = 6% + 6% = 12%
Average rate = (Appropriate interest rate for type A firm bond + Appropriate interest rate for type B firm bond) / 2 = (8% + 12%) / 2 = 10%
Since the probability of any of the two firms is equal and I do not have the knowledge of which type of firm they are dealing with, I would be willing to lend at average rate of 10%.
B-1. Would this market function well?
No, this market will not function well.
The reason is that the average rate of 10% is higher than the Appropriate interest rate for type A firm bond of 8%. This would make the type A firm to withdraw from the market and only type B firm will be left in the market.
B-2. What type of asymmetric information problem does this example illustrate?
This example illustrates an adverse selection problem. This is because after type A firm which is a desirable leaves the market, only type B firm which is the less desirable firms will be willing to borrow. This makes the quality of the market to detoriorate.
Mary Magnolia wants to open a flower shop, the Petal Pusher, in a new mall. She has her choice of three different floor sizes, 200 square feet, 500 square feet, or 1,000 square feet. The monthly rent will be $1 a square foot. Mary estimates that if she has F square feet of floor space and sells y bouquets a month, her variable costs will be cv(y) = y^ 3/ 4F per month.
Required:
a. If she has 200 square feet of floor space, write down her marginal cost function and her average cost function. At what amount of output is average cost minimized? At this level of output, how much is average cost?
b. If she has 500 square feet, write down her marginal cost function and her average cost function. At what amount of output is average cost minimized? At this level of output, how much is average cost? .
c. If she has 1,000 square feet of floor space, write down her marginal cost function and her average cost function. At what amount of output is average cost minimized? At this level of output, how much is average cost?
Answer:
a-1. We have:
MC = 3y^2 / 800 <=== Marginal cost (MC) function
AC = (200 / y) + (y^2 / 800) <=== Average cost (AC) function
a-2. The amount of output is 43.09 bouquets.
a-3. Average cost at this level is $6.96 per unit.
b-1. We have:
MC = 3y^2 / 2,000 <=== Marginal cost (MC) function
AC = (500 / y) + (y^2 / 2,000) <=== Average cost (AC) function
b-2. The amount of output is 79.37 bouquets.
b-3. Average cost at this level is $9.45 per unit.
c-1. We have:
MC = 3y^2 / 4,000 <=== Marginal cost (MC) function
AC = (1,000 / y) + (y^2 / 4,000) <=== Average cost (AC) function
c-2. The amount of output is 125.99 bouquets.
c-3. Average cost at this level is $11.91 per unit.
Explanation:
Given:
cv(y) = y^3/ 4F ………………… (1)
cf = fixed cost = F
Therefore, total cost (C) per month is as follows:
C(y) = cf + cv(y) = y^ 3/ 4F
C(y) = F + y^3 / 4F ……………………… (2)
a-1. If she has 200 square feet of floor space, write down her marginal cost function and her average cost function.
This implies that:
F = 200
Marginal cost (MC) function is obtained by taking the first derivative of equation (1) and substituting F = 200 as follows:
MC = cv’(y)
MC = 3y^2 / (4 * 200)
MC = 3y^2 / 800 ………………. (3) <= Marginal cost (MC) function
Average cost (AC) function can be obtained by dividing equation (2) by y, substituting F = 200 and solve as follows:
AC = C’(y) = (200 / y) + (y^3 / 4F) / y
AC = (200 / y) + (y^3 / (4 * 200)) / y
AC = (200 / y) + (y^2 / 800) …………………. (4) <= Average cost (AC) function
a-2. At what amount of output is average cost minimized?
Since average cost is minimized when MC = AC, we therefore equate equations (3) and (4) and solve for y as follows:
3y^2 / 800 = (200 / y) + (y^2 / 800)
0.00375y^2 = (200 / y) + 0.00125y^2
0.00375y^2 - 0.00125y^2 = 200 / y
0.0025y^2 = 200 / y
(0.0025y^2)y = 200
0.0025y^3 = 200
y^3 = 200 / 0.0025
y^3 = 80,000
y = 80,000^(1/3)
y = 43.09
Therefore, the amount of output at which is average cost minimized is 43.09 bouquets.
a-3. At this level of output, how much is average cost?
Substituting y = 43.09 into equation (4), we have:
AC = (200 / 43.09) + (43.09^2 / 800)
AC = 6.96
Therefore, average cost at this level is $6.96 per unit.
b-1. If she has 500 square feet, write down her marginal cost function and her average cost function.
This implies that:
F = 500
Marginal cost (MC) function is obtained by taking the first derivative of equation (1) and substituting F = 500 as follows:
MC = cv’(y)
MC = 3y^2 / (4 * 500)
MC = 3y^2 / 2,000 ………………. (5) <= Marginal cost (MC) function
Average cost (AC) function can be obtained by dividing equation (2) by y, substituting F = 500 and solve as follows:
AC = C’(y) = (500 / y) + (y^3 / (4 * 500)) / y
AC = (500 / y) + (y^3 / (4 * 500)) / y
AC = (500 / y) + (y^2 / 2,000) …………………. (6) <= Average cost (AC) function
b-2. At what amount of output is average cost minimized?
Since average cost is minimized when MC = AC, we therefore equate equations (5) and (6) and solve for y as follows:
3y^2 / 2,000 = (500 / y) + (y^2 / 2,000)
0.0015y^2 = (500 / y) + 0.0005y^2
0.0015y^2 - 0.0005y^2 = 500 / y
0.001y^2 = 500y
0.001y^2 * y = 500
0.001y^3 = 500
y^3 = 500 / 0.001
y^3 = 500,000
y = 500,000^(1/3)
y = 79.37
Therefore, the amount of output at which is average cost minimized is 79.37 bouquets.
b-3. At this level of output, how much is average cost?
Substituting y = 79.37 into equation (6), we have:
AC = (500 / 79.37) + (79.37^2 / 2,000)
AC = 9.45
Therefore, average cost at this level is $9.45 per unit.
c-1. If she has 1,000 square feet, write down her marginal cost function and her average cost function.
This implies that:
F = 1,000
Marginal cost (MC) function is obtained by taking the first derivative of equation (1) and substituting F = 1,000 as follows:
MC = cv’(y)
MC = 3y^2 / (4 * 1,000)
MC = 3y^2 / 4,000 ………………. (7) <= Marginal cost (MC) function
Average cost (AC) function can be obtained by dividing equation (2) by y, substituting F = 1,000 and solve as follows:
AC = C’(y) = (1,000 / y) + (y^3 / (4 * 1,000)) / y
AC = (1,000 / y) + (y^3 / (4,000)) / y
AC = (1,000 / y) + (y^2 / 4,000) …………………. (8) <= Average cost (AC) function
c-2. At what amount of output is average cost minimized?
Since average cost is minimized when MC = AC, we therefore equate equations (7) and (8) and solve for y as follows:
3y^2 / 4,000 = (1,000 / y) + (y^2 / 4,000)
0.00075y^2 = (1,000 / y) + 0.00025y^2
0.00075y^2 - 0.00025y^2 = 1,000 / y
0.0005y^2 = 1,000 / y
0.0005y^2 * y = 1,000
y^3 = 1,000 / 0.0005
y^3 = 2,000,000
y = 2,000,000^(1/3)
y = 125.99
Therefore, the amount of output at which is average cost minimized is 125.99 bouquets.
c-3. At this level of output, how much is average cost?
Substituting y = 125.99 into equation (8), we have:
AC = (1,000 / 125.99) + (125.99^2 / 4,000)
AC = 11.91
Therefore, average cost at this level is $11.91 per unit.
Your company manufactures riding lawn mowers.One of your customers,Marie,writes a claim,demanding a compensation for her faulty mower.On examining the faulty product,a service executive in your company discovers that someone dismantled the mower and attempted to fix it.Which of the following statements is the best way to phrase your refusal of Marie's claim for adjustment?
A) Our contract,which you signed,clearly absolves us of any liability in this case.
B) If you read our contract,you would know that we are not liable to pay compensation in such cases.
C) Paragraph 2 of our contract clearly shows that your claim is without foundation.
D) As stated in our contract,we are liable to pay compensation only when our personnel repair the equipment.
E) Your attempt to repair the lawn mower on your own has rendered the product warranty void.
Answer: D) As stated in our contract,we are liable to pay compensation only when our personnel repair the equipment
Explanation:
Based on the information given in the question, the best way to phrase the refusal of Marie's claim for adjustment is that "As stated in our contract, we are liable to pay compensation only when our personnel repair the equipment".
Since a service executive in the company discovers that the mower was dismantled by someone, then Marie's claim for adjustment can be refused since it wasn't dismantled by someone from the company.
In January of the current year, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months later in the same year after the gift, a $500 dividend was declared on the stock and paid to Dora's granddaughter. What amount must Dora's granddaughter include in her gross income for the current year
Answer:
$500
Explanation:
Based on the information given we were told that the DIVIDEND of the amount of $500 which was declared on the stock was paid to Dora's granddaughter Several months later, which means that the amount that Dora's granddaughter must include in her GROSS INCOME for the current year will be the dividend amount of $500 that was paid to Dora's granddaughter.
Therefore the amount that Dora's granddaughter must include in her gross income for the current year is $500
Lester sold a warehouse with an original cost of $150,000 for $230,000. The warehouse had accumulated depreciation of $40,000. The recognized gain on the sale was $ . The amount of the gain that is unrecaptured Section 1250 gain is $ and will be taxed at a maximum rate of percent. The remaining $ will be taxed at a maximum rate of 20%.
Answer:
Recognized Gain:
= Selling price - Net book value
= 230,000 - (150,000 - 40,000)
= $120,000
The amount of the gain that is unrecaptured Section 1250 gain:
= Selling Price - Cost of asset - Accumulated depreciation
= 230,000 - 150,000 - 40,000
= $40,000
Tax will be maximum rate of 25% as per IRS rules.
The cash to be charged at maximum of 20% is:
= Gain - Section 1250 gain
= 120,000 - 40,000
= $80,000
is Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. All cost allocation bases used in ABC systems are cost drivers. II. ABC systems are useful in manufacturing, but not in merchandising or service industries. III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed.
Answer:
I. All cost allocation bases used in ABC systems are cost drivers.
III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed.
Explanation:
I. is TRUE since the basis of ABC costing is determining, quantifying, and using cost drivers to allocate overhead costs.
III, is TRUE since the advantage of ABC costing is allocating costs based on cause and effect relationships.
II. ABC systems are useful in manufacturing, but not in merchandising or service industries. ⇒ FALSE
ABC costing can also be used for merchandising and service industries, although, it is mostly used in manufacturing businesses.What kind of report is a summary of a company's total sales over a five-year period?
a product list
a market research report
a sales volume report
a customer list
Outdoor Gear Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October: Variable overhead spending variance $1,300 Unfavorable Variable overhead efficiency variance $182 Unfavorable Budgeted machine hours allowed for actual output 608 machine hours Actual cost per machine hour $28 Budgeted cost per machine hour $26Calculate the variable overhead flexible-budget variance. $1,118 favorable $1,118 unfavorable $1,482 unfavorable $1,482 favorable
Answer:
$1,482 unfavorable
Explanation:
Calculation to determine the variable overhead flexible-budget variance
Using this formula
Variable overhead flexible-budget variance=Variable overhead spending variance Unfavorable + Variable overhead efficiency variance Unfavorable
Let plug in the formula
Variable overhead flexible-budget variance=$1,300 (U) + $182 (U)
Variable overhead flexible-budget variance= $1,482 (U)
Therefore the variable overhead flexible-budget variance is $1,482 unfavorable
Rachel's Designs has 2,000 shares of 7%, $50 par value cumulative preferred stock issued at the beginning of 2019. All remaining shares are common stock. Due to cash flow difficulties, the company was not able to pay dividends in 2019 or 2020. The company plans to pay total dividends of $23,000 in 2021. How much of the $23,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders
Answer:
the dividend paid to preferred stockholders and paid to common stockholders is $21,000 and $2,000 respectively
Explanation:
The computation of the dividend paid to preferred stockholders and paid to common stockholders is shown below:
For preferred stockholders
= (2,000 × 7% × $50) × 3 years (2019,2020 and 2021)
= $7,000 × 3 years
= $21,000
And, for common stockholders
= $23,000 - $21,000
= $2,000
Hence, the dividend paid to preferred stockholders and paid to common stockholders is $21,000 and $2,000 respectively
Break-even sales and sales to realize operating incomeFor the current year ended March 31, Cosgrove Company expects fixed costs of $465,000, a unit variable cost of $62, and a unit selling price of $92.a. Compute the anticipated break-even sales (units).fill in the blank 1 unitsb. Compute the sales (units) required to realize operating income of $108,000.fill in the blank 2 units
Answer:
Break even point in units=15,500 units
Units to achieve target profit=19,100 units
Explanation:
Break-even point is the level of activity at which a firm must operate such that its total revenue will equal its total costs. At this point, the company makes no profit or loss because the total contribution exactly equals the total fixed costs
Break-even point (in units) is calculated using this formula:
Break even point in units = Total general fixed cost/ (selling price - Variable cost)
Break even point in units= $465,000/(92-62)=15,500 units
Units to achieve target profit = (Total general fixed cost for the period + target profit)/ contribution per unit
Units to achieve target profit of 108,000 = ($465,000+ 108,000)/ (92-62)=19,100 units
Break even point in units=15,500 units
Units to achieve target profit=19,100 units
What do we call an item that is essential for survival in economics?
A Needs
B Wants
C scarcity
D opportunity cost
Answer:
A) Needs
Explanation:
Epsilon currently pays $76 per unit to buy a part for a product it sells. Epsilon has excess capacity, and estimates that making the part would incur variable costs of $8 for direct materials and $40 for direct labor. Epsilon's normal predetermined overhead rate is 150% of direct labor cost, but management computes an incremental overhead rate of $16.00 per unit to make this part. Epsilon should choose to:___.
A. Buy since the relevant cost to make it is $82 per unit.
B. Make since the relevant cost to make it is $61.20 per unit.
C. Buy since the relevant cost to make it is more than $74.00 per unit.
Answer:
If the company males the unit, it will save $12 per unit.
Explanation:
Giving the following information:
Buying price= $76
Make in-house:
Direct material= $8
Direct labor= $40
Incremental Overhead= $16
The total cost of production is:
Total unitary cost of production= 8 + 40 + 16
Total unitary cost of production= $64
If the company males the unit, it will save $12 per unit.
ways in which they can create an environment that promotes
creative thinking in the workplace
The correct answer to this open question is the following.
Although you did not provide further context or reference, we can comment on the following.
The ways in which they can create an environment that promotes
creative thinking in the workplace are the following.
-Promoting open communication at any time. People in the company have to know that the leader's doors are always open. This is crucial.
-Respect diversity and cultural differences. This way people of diverse backgrounds are going to feel trusted and would express themselves freely and creatively.
-Invite people to collaborate. Do it on a daily basis, encouraging them to express their ideas, although they considered strange or crazy. You never know when a crazy idea will be a great idea in the corporate world.
-Foster a culture of change and innovation. Welcome any suggestion and never criticize it.
-Offer continual education programs and training so employees have always something to think of and learn.
The standard cost of Product B manufactured by Pharrell Company includes 3.6 units of direct materials at $5.90 per unit. During June, 26,600 units of direct materials are purchased at a cost of $5.65 per unit, and 26,600 units of direct materials are used to produce 7,300 units of Product B. (a) Compute the total materials variance and the price and quantity variances.
Answer:
Results are below.
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (5.9 - 5.65)*26,600
Direct material price variance= $6,650 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (7,300*3.6 - 26,600)*5.9
Direct material quantity variance= $1,888 unfavorable
Waterway Industries purchased land as a factory site for $1335000. Waterway paid $120000 to tear down two buildings on the land. Salvage was sold for $8300. Legal fees of $5220 were paid for title investigation and making the purchase. Architect's fees were $46000. Title insurance cost $3900, and liability insurance during construction cost $4200. Excavation cost $15280. The contractor was paid $4500000. An assessment made by the city for pavement was $9700. Interest costs during construction were $258000. The cost of the land that should be recorded by Waterway Industries is $1479620. $1465520. $1469920. $1455820.
Answer:
$1,465,520
Explanation:
Calculation of cost of the land that should be recorded by Water ways industries
Cost of land = Purchase price + demolition of building - sales of salvage + legal fees + Title insurance cost + Payment assessment
Cost of land = $1,335,000 + $120,000 - $8,300 + $5,220 + $3,900 + $9,700
Cost of land = $1,465,520
A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead): Plus Max Units produced 200 16,000 Batch size (units) 10 400 Number of setups 20 40 Direct labor hours per unit 5 5 Total direct labor hours 1,000 80,000 Cost per setup$1,080 Total setup cost$64,800 Using number of setups as the activity base, the amount of setup cost allocated to each unit of product for Plus and Max, respectively is:Multiple Choice$21.60; $.54.$60.00; $60.00.$108.00; $2.70.$54.00; $27.00.$200.00; $16,000.00
Answer:
Apportioned set-up cost
Plus =$21,600
Max=$43,200
Explanation:
Activity-based costing is a form of absorption costing where overheads are charged to product using cost drivers.
Under this method, overheads are first analyzed and categorized by the activities responsible for them and then charged to product based on the amount of benefits enjoyed using cost drivers.
The cost driver in this scenario is the number of set-ups
Activity rate per driver is calculated as:
Activity overhead for the period / Total cost drivers for the period
So, we can apply this formula to the scenario above:
Set-up overhead= $64,800
Total set-ups for the period = 20 + 40 = 60
Overhead cost per set-up = $64,800/60=1,080
Set-up cost allocation:
Plus - 20 × 1,080=$21,600
Max- 40 × 1,080=$43,200
Apportioned set-up cost
Plus =$21,600
Max-=$43,200
Sexton, Corp., has projected the following sales for the coming year: Q1 Q2 Q3 Q4 Sales $ 860 $ 940 $ 900 $ 1,000 Sales in the year following this one are projected to be 15 percent greater in each quarter. a. Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Calculate payments to suppliers assuming a 90-day payables period. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Calculate payments to suppliers assuming a 60-day payables period.
Answer:
Q1 Q2 Q3 Q4
a. Payment of accounts ($) 258.00 282.00 270.00 300.00
b. Payment of accounts ($) 258.00 282.00 270.00 300.00
c. Payment of accounts ($) 258.00 282.00 270.00 300.00
Explanation:
Given:
Q1 Q2 Q3 Q4
Sales ($) 860 940 900 1,000
Therefore, we have:
a. Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
This is done as follows:
Q1 Q2 Q3 Q4
Order (30% of Sales) ($) 258.00 282.00 270.00 300.00
Payment of accounts ($) 258.00 282.00 270.00 300.00
b. Calculate payments to suppliers assuming a 90-day payables period. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
A 90-day payables period implies that the payment has be made within the next 90 days or within one quarter or the same quarter. Therefore, we have:
Q1 Q2 Q3 Q4
Order (30% of Sales) ($) 258.00 282.00 270.00 300.00
Payment of accounts ($) 258.00 282.00 270.00 300.00
c. Calculate payments to suppliers assuming a 60-day payables period.
A 60-day payables period implies the payment for the Order in each of the quarters has to be made in the same quarter.
Therefore, we have:
Q1 Q2 Q3 Q4
Order (30% of Sales) ($) 258.00 282.00 270.00 300.00
Payment of accounts ($) 258.00 282.00 270.00 300.00
Note:
It can be observed that the answer look the same for all the questions.
Mount Snow Inc. operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 15% return on the company's $115 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $43,500,000 for the ski season. The resort serves 900,000 skiers and snowboarders each season. Variable costs are $10 per guest. The resort had such a favorable reputation among skiers and snowboarders that it had some control over the lift ticket prices. Assume that Mount Snow's reputation has diminished and other resorts in the vicinity are charging only $66 per lift ticket. Mount Snow has become a price-taker and won't be able to charge more than its competitors. At the market price, Mount Snow's managers believe they will still serve 900,000 skiers and snowboarders each season.
Requried:
a. Would Mount Snow emphasize target costing or cost-plus pricing. Why?
b. If other resorts in the area charge $66 per day, what price should Mount Snow charge?
Answer:
Mount Snow Inc.
a. Mount Snow would emphasize cost-plus pricing and not target costing. The target costing considered the investors expected returns on investment. Based on the target returns, customers were then charged any fee to meet the target profit, including all other costs. Now that Mount Snow is a price-taker, it cannot meet the target returns. It can only work with the cost-plus pricing strategy in order to rein in its costs.
b. As a price-taker, Mount Snow cannot charge more than $66. It should charge $66.
Explanation:
a) Data and Calculations:
Investors expected return on investment = 15%
Cost of investment = $115,000,000
Ski Season's Fixed costs = $43,500,000
No of skiers and snowboarders served = 900,000
Variable costs per guest = $10
Charges by other resorts in the vicinity = $66 per lift ticket
Total expected revenue $59,400,000 ($66 * 900,000)
Total variable costs = $9,000,000
Fixed costs = 43,500,000
Total costs = $52,500,000
Profit = $6,900,000
Target profit = $17,250,000 ($115,000,000 * 15%)
Which of the following is a disadvantage of incentive compensation plans? Group of answer choices Employees are taxed heavily on their income from incentive plans. Employers are taxed heavily on their expenditure incurred through incentive plans. Employees know that rise in productivity will have no impact on their compensation. Employers are unable to increase employee productivity while following incentive plans. Employees don't develop loyalty to their employers when incentive plans are practiced.
Answer:
Employees don't develop loyalty to their employers when incentive plans are practiced.
Explanation:
Incentive compensation plan can be regarded as strategic that is been utilized by using incentives in driving a better business outcomes together with alignment of sales rep behavior to go with the goals of the organization. It is a compensation plan which can appear in different forms such as commissions as well as bonuses and prizes. It should be noted that one of the disadvantage of incentive compensation plans is that Employees don't develop loyalty to their employers when incentive plans are practiced.
Brooks Corporation has a Food Services department that provides food for employees in all other departments of the company. For September, variable food costs were budgeted at $4 per meal, based on 14,000 meals served during the month. At the end of the month, it was determined that 15,000 meals had been served at a total cost of $70,000. What is the amount of the variable food costs that should be charged to the other departments of the company at the end of the month
Answer:
the amount that should be charged for the other department is $60,000
Explanation:
The computation of the amount that should be charged for the other department is shown below:
= Variable cost per meal × number of meals
= $4 × 15,000 meals
= $60,000
hence, the amount that should be charged for the other department is $60,000
So the same would be relevant