Answer with Explanation:
The wage restrictions would limit the competition of Japanese firms as the Executive Directors will be under under-paid and they will looking for jobs else where. This demotivation due to low pays would affect the competition of Japanese firms as the employee's productivity will also be lowered. The employees rather they are of Executive Level or they belong to lower level, they must be paid according to their performance. Their might be a fixed portion and a performance based portion which would erge the employee to work hard.
TB MC Qu. 149 A machine with a cost... A machine with a cost of $133,000 and accumulated depreciation of $86,500 is sold for $53,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:
Answer:
$0
Explanation:
Under the direct method of cash flow statement the operating activities recorded the cash revenues and cash payment only
In the given situation, there is a machine cost, accumulated depreciation and the sale of the machine is given
Nothing should be recorded in operating activities as the sale of the machine come under the investing activity
Therefore $0 should be reported
Current access control rosters should be authenticated by the manager or their designated representative. True False
Answer:
TRUE
Explanation:
Current Access Control rosters should be authenticated, authorized and accounted for by the manager or their designated representative.
Bio-metrics, Electronic locks, and Smart cards are sensitive data-derivation technologies and since they are applied in a number of sectors - e.g. Telecommunications, Retail, Defense, Healthcare, Hospitality, and Information Technology - current access to devices and software applications should be authenticated by the manager or a designated representative of the manager.
"DEF Corporation, after many profitable years, declares a one-time special cash dividend of $5.00 per share. After the announcement, the stock is trading at $50 per share. Your customer holds 1 DEF Jan 55 Call. As of the ex date, the customer will have:"
Answer: B. 1 DEF Jan 50 Call
Explanation:
The Options Clearing Corporation (OCC) acting under its mandate of being an issuer and guarantor for options and futures contracts can alter options prices but does not do so for prices based on normal dividends as they are more regular and their effects are already accounted for in the price of the call.
When a company calls a one-time special cash dividend, this is new to the market which would not have incorporated it into the price of the call. The OCC will then adjust the price to account for this.
In this case it will do so by subtracting the dividend from the call;
= 55 - 5
= $50
The customer will then have 1 DEF Jan 50 Call .
rane Company had the following assets on January 1, 2017.
Item Cost Purchase Date Useful Life (in years) Salvage Value
Machinery $69,580 Jan. 1, 2007 10 $0
Forklift 29,400 Jan. 1, 2014 5 0
Truck 32,736 Jan. 1, 2012 8 2,944
During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $11,760. The truck was discarded on December 31.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2016.
Answer:
Journal entries are prepared below
Explanation:
Journal entries required are given as follows
Jan. 1 (To record retirement of machinery)
Debit Credit
Accumulated depreciation-equipment $69,580
Equipment $69,580
June. 30 (To record the depreciation expense on forklift)
Debit Credit
Depreciation expense 2940
Accumulated depreciation-equipment 2940
Working
Annual depreciation = $29,400 / 5 years = $5880
depreciation for 6 months = $5880 x 6/12 = $2940
June. 30 (To record sale of forklift)
Debit Credit
Cash 11760
Accumulated depreciation-equipment(w) 20580
Equipment 29400
Gain on disposal of plant assets 2940
Working
Accumulated depreciation = 5880 x 3.5 years
Dec. 31 (To record depreciation expense on truck)
Debit Credit
Depreciation expense 3724
Accumulated depreciation-equipment 3724
Working
Annual depreciation on truck = ($32,736- $2,944) / 8 years = $3724
Depreciation for 2017 = $3724
Dec. 31 (To record discarding of the truck)
Debit Credit
Salvaged materials 2,944
Accumulated depreciation-equipment 22344
Loss on disposal of plant assets 7448
Equipment 32,736
Working
Accumulated depreciation = 3724 x 6 years = 22,344
Data pertaining to the current position of Forte Company are as follows:
Cash $412,500
Marketable securities 187,500
Accounts and notes receivable (net) 300,000
Inventories 700,000
Prepaid expenses 50,000
Accounts payable 200,000
Notes payable (short-term) 250,000
Accrued expenses 300,000
Required:
Compute:
a. The working capital.
b. The current ratio.
c. The quick ratio.
Answer:
Forte Company
Computation of :
a. The working capital = Current Assets minus Current Liabilities
= $1,650,000 - $750,000
= $900,000
b. The current ratio = Current assets/Current liabilities
= $1650,000/$750,000
= 2.2 : 1
c. The quick ratio = (Current asset minus Inventory)/Current liabilities
= ($1,650,000 - 750,000)/$750,000
= $900,000/$750,000
= 1.2 : 1
Explanation:
a) Data and Calculations:
Cash $412,500
Marketable securities 187,500
Accounts and notes receivable (net) 300,000
Inventories 700,000
Prepaid expenses 50,000
Total Current Assets $1,650,000
Accounts payable 200,000
Notes payable (short-term) 250,000
Accrued expenses 300,000
Total Current Liabilities $750,000
b) Forte Company's working capital is the difference between the current assets and the current liabilities. In this case, it is very positive with a huge sum of $900,000.
c ) Forte Company's current ratio is an expression of the relationship between current assets and current liabilities. It shows how much of current liabilities that current assets can cover. The ability of the management of Forte Company to settle its current obligations from the current assets is worked out under this ratio.
d) Forte has a quick ratio of more than 1 : 1. It is similar to the current ratio but with the omission of the Inventory and Prepaid Expenses which are regarded as always taking longer to sell and recover respectively.
Sheffield Corporation purchased machinery on January 1, 2017, at a cost of $250,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $24,000. The company is considering different depreciation methods that could be used for financial reporting purposes.Required:Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.
Answer and Explanation:
(A) Depreciation Schedules Under Straight line method
Depreciation rate under straight line method = 1 ÷ Useful life of asset
= 1 ÷ 4
=25%
Depreciable cost = Cost of the Asset - Salvage value
= $250,000 - $24000
= $226,000
Year Depreciable Depreciation Annual Accumulated Book
cost rate Depreciation Depreciation Value
Expense
2017 $226,000 25% $565,00 56,500 $193,500
($250,000 - $56,500)
2018 $226,000 25% $565,00 $113,000 $137,000
($193,500 - $56,500)
2019 $226,000 25% $565,00 $169,500 $80,500
($137,000 - $56,500)
2020 $226,000 25% $565,00 $226,000 $24,000
($80,500 - $56,500)
For computing the annual depreciation we simply multiply the depreciable cost with depreciation rate.
(B) Depreciation Schedules Under Double declining balance method
Depreciation rate under Double declining Balance method
= 2 × Straight line method
= 2 × 25%
= 50%
Year Book value Depreciation Annual Accumulated Book
beginning rate Depreciation Depreciation Value
of the year Expense
2017 $250,000 50% $125,000 $125,000 $125,000 2018 $125,000 50% $62,500 $187,500 $62,500 2019 $62,500 50% $31,250 $218,750 $31,250
2020 $31,250 $7,250 $226,000 $24,000
For computing the annual depreciation expenses we simply multiply the book value beginning of the year with depreciation rate.
2020 Depreciation balance
= Book Value beginning 2020 - Salvage value
= $31,250 - $24,000
= $7,250
Discuss and analyze a situation where you worked on a team/ project team consisting of diverse or intercultural team members
a. What were some good and/or poor examples of communication?
b. Discuss any examples or interpretation of cultural differences as described in Hoftstede's Cultural Values chart on p. 46 of your text (i.e. individualism, time orientation, formality, etc.).
c. Is there anything that could have been done to make the communication more effective?
Explanation:
a. What were some good and/or poor examples of communication?
Intercultural communication in the workplace can generate some significant difficulties, in an intercultural work team, there may be behaviors of certain members that differ from the rest of the group, which can mean lack of integration of the team due to lack of respect and interest to the cultural values of a particular member.
b. Discuss any examples or interpretation of cultural differences as described in Hoftstede's Cultural Values chart on p. 46 of your text (i.e. individualism, time orientation, formality, etc.).
Formality can be interpreted differently according to different cultures. In a more flexible culture like the American one, for example, formality may not be so expressed through the use of formal language and dress, whereas in a less flexible culture, this can be seen as a disrespect, as they can establish a more serious and formal communication in the workplace.
c. Is there anything that could have been done to make the communication more effective?
To make intercultural communication more effective, it is necessary above all to respect the individual values of an individual that exist in certain ways in some situations. The ideal is that people are open to learn and exchange experiences, willing to help the individual to integrate into the group, and above all to act in an ethical and respectful way always.
Orbit Services, Inc. pays $ 760 ,000 to acquire 30% (200,000 shares) of the voting stock of State Investments, Inc. on January 5, 2019. State Investments, Inc. declares and pays a cash dividend of $ 1.40 per share on June 14, 2019. What is the correct journal entry for the transaction on June 14, 2019?
Answer:
since Orbit's investment represents a significant influence (more than 20%) on State, we have to use the equity method for accounting for investments in other companies.
the journal entry to record the initial investment:
January 5, 2019, investment in State Investments, Inc.
Dr Investment in State Investments, Inc., 760,000
Cr Cash 760,000
When we use the equity method, cash dividends decrease the carrying value of our investments:
June 14, 2019, cash dividend received from State Investments, Inc.
Dr Cash 280,000
Cr Investment in State Investments, Inc., 280,000
What's the present value of $4,500 discounted back 5 years if the appropriate interest rate is 4.5%, compounded semiannually?
Answer:
The present value = $3,602.30
Explanation:
To calculate this, we will use the formula for calculating the future value for an amount invested, compounded semiannually at a certain interest rate. This is done as follows:
[tex]FV\ =\ PV(1+\frac{r}{n})^{(n\times t)}\\[/tex]
where:
FV = Future value = $4,500
PV = Present value = ??
r = interest rate = 4.5% = 4.5/100 = 0.045
n = number of compunding period per year = semiannually = 2
t = time = 5
[tex]4,500\ =\ PV(1+\frac{0.045}{2})^{(2\times 5)}\\\\4,500 = PV( 1+0.0225)^{10}\\4,500 = PV(1.0225)^{10}\\4,500 = PV (1.249203)\\Dividing\ both\ sides\ by\ 1.249203\ and\ making\ PV\ the\ subject\ of\ the\ formula\\\PV = \frac{4,500}{1.249203} \\PV= 3,602.297[/tex]
Therefore, the present value = $3,602.30
What are targets for a business to achieve?
A. Objectives
B. Smart goals
C. Social enterprises
D. Profits
If an economist wishes to determine whether there is evidence that average family incomes in a community exceeds $25,000:_______
a. either a one-tailed or two-tailed test could be used with equivalent results.
b. a one-tailed test should be utilized.
c. a two-tailed test should be utilized.
d. None of the above.
Answer: one tailed test should be utilized
Explanation:
From the question, we are informed that an economist wishes to determine whether there is evidence that average family incomes in a community exceeds $25,000.
A one tailed test should be utilized because the region of rejection will just have to be based on one side.
A rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called
Answer:
Poison pill
Explanation:
Poison pill is a strategy that is used to avoid that another party takes over an organization by allowing the current shareholders of the firm to acquire more shares. According to this, the answer is that a rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called poison pill as this is a defensive strategy that companies use to avoid a takeover from an outside party.
One of the problems with licensing as a method of achieving international business is that it is a much more difficult procedure to implement than the other methods.
a. True
b. False
Answer: False
Explanation:
Licensing involves a company giving another company in another country/market permission to produce its products or use its likeness. The company that gets the license will then pay the parent company specified amounts for being able to do so.
This method of international business is cheap as the company licensing will see its brand spread to other countries without actually having to worry about set-up costs in the other country which can be very high. It is therefore one of the easiest methods of expanding to international markets there is.
Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the payment of the dividend is:
Answer:
Please see journals below
Explanation:
Retained earnings Dr $104,000
Common dividend payable Cr $104,000
Common dividend payable Dr $104,000
Cash Cr. $104,000
Retained earnings Dr $100,100
Common dividends payable Cr $100,100
Common dividends payable Dr $100,100
Cash Cr $100,100
Retained earnings Dr $110,000
Common dividends payable Cr $110,000
Working
Dividends payable
= 190,000 × $0.55
= $104,000
Common dividend payable
= $0.55 × (190,000 shares - 8,000 shares)
= $100,100
A production department’s beginning inventory cost includes $478,000 of conversion costs. This department incurs an additional $1,047,500 in conversion costs in the month of March. Equivalent units of production for conversion total 770,000 for March.Required:Calculate the cost per equivalent unit of conversion using the weighted-average method.
Answer: $1.98
Explanation:
Equivalent Units of Production are used when the manufacturers have not completely finished their products for the year. This helps them express it in terms of fully manufactured units.
Using the weighted average method, the cost per equivalent unit is;
= [tex]\frac{Beginning inventory cost + Cost of current production}{Equivalent units of production}[/tex]
= [tex]\frac{478,000 + 1,047,500}{770,000}[/tex]
= $1.98
NVS, Inc just issued 5 year stock
Balance sheet. Use the data from the following financial statements in the popup window. Complete the balance sheet. Hint: Find the accumulated depreciation for 2014 first. The accumulated depreciation for 2014 is:
Data Table
Partial Income Statement Year Ending 2014
Sales revenue $350,100
Cost of goods sold $142,000
Fixed costs $43,100
Selling, general, and
administrative expenses $28,200
Depreciation $46,000
Partial Balance Sheet 12/31/2013
ASSETS LIABILITIES
Cash $16,100 Notes payable $14,100
Accounts receivable $28,000 Accounts payable $18,800
Inventories $47,800 Long-term debt $190,100
Fixed assets $368,000 OWNERS' EQUITY
Accumulated
depreciation (-) $140,400 Retained earnings
Intangible assets $81,900 Common stock $131,800
Partial Balance Sheet 12/31/2014
ASSETS LIABILITIES
Cash $26,000 Notes payable $11,800
Accounts receivable $19,100 Accounts payable $23,900
Inventories $53,100 Long-term debt $162,100
Fixed assets $448,100 OWNERS' EQUITY
Accumulated depreciation (-) Retained earnings
Intangible assets $81,900 Common stock $182,000
Answer:
57
Explanation:
im rich
Which group would advertisers want to target and with what type of advertisement immediately before a holiday, as opposed to during a non-holiday time
Answer:
in graph it shows that the highest effect is w low content/low motivation/low knowledge
-only tend to be persuaded for a short time and would need the advertisement right before target date
b) group would be persuaded by high content argument but will remain persuaded so do not need to be advertised immediately before the holiday
Explanation:
Suppose you are building a scatter plot in Excel for a large amount of data. After selecting the scatter plot option, how do you enter the data into your scatter plot?
a. By manually typing each data point into the scatter plot
b. By using the Quick Styles button under the Chart menu
c. By using the Select Data button and the Select Data Source option
Answer:
c. By using the Select Data button and the Select Data Source option
Explanation:
A scatter plot is a plot which is used to plot the points of the data on the horizontal and the vertical axis also it depicts how one variable is affected by the another.
After preparing the scatter plot to enter the data in the scatter plot we need to use the data button and then data source option so that the data could be entered in the scatter plot
hence, option c is correct
The BRS Corporation makes collections on sales according to the following schedule: 40% in month of sale 55% in month following sale 5% in second month following saleThe following sales have been budgeted: Sales April $210,000 May $160,000June $150,000 Budgeted cash collections in June would be:______.a. $150,840.b. $158,000.c. $149,000.d. $150,000.
Answer:
Total cash collection= $158,500
Explanation:
Giving the following information:
Cash collection:
40% in the month of sale
55% in the month following sale
5% in the second month following sale
Sales:
April $210,000
May $160,000
June $150,000
Cash collection June:
Sales in cash from June= 150,000*0.4= 60,000
Sales on account from May= 160,000*0.55= 88,000
Sales on account from April= 210,000*0.05= 10,500
Total cash collection= $158,500
A bond with par value of $1,000 has an annual coupon rate of 4.8% and currently sells for $970. What is the bond’s current yield? (Round your answer to 2 decimal places.)
Answer:
The Bond's Current yield = 4.95%
Explanation:
Annual coupon = Value of Bond * Annual Coupon rate
Annual coupon = $1000 * 4.8%
Annual coupon =$48
The Bond Current yield =Annual coupon / Current price
The Bond Current yield = $48 / $970
The Bond Current yield = 0.049485
The Bond Current yield = 4.9485
The Bond Current yield = 4.95%
"A broker-dealer who acted as financial advisor to a municipality in structuring a new issue now wishes to act as underwriter in a negotiated offering. Which statement is TRUE?"
Answer:
B. The financial advisor is prohibited from acting as the underwriter
Explanation:
As per the rule of the Municipal Securities Rulemaking Board, the financial advisor cannot be the underwriter.
The financial advisor for a municipality is paying the advisory fee for assisting the structure of the municipality in order to the issuance of the new bond so that the less interest cost to be paid.
But in the case of the underwriter, it contains high rate of interest as it is very easiest way for selling
So through this, the conflict arises between these two parties
Therefore option B is correct
The Andrews Company has just purchased $55,736,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $5,573,600. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (Use FASB GAAP)
Answer:
Book value = $45,703,520
Explanation:
We can calculate the book value of purchase after its third year of use by deducting all three years of depreciation from the cost of the asset.
DATA
Purchase cost = $55,736,000
Useful life = 15 years
Salvage value = $5,573,600
Solution
Book value = Cost - Accumulated depreciation
Book value = $55,736,000 - $10,032,480(w)
Book value = $45,703,520
Working
Depreciation per year = [tex]\frac{Cost-salvagevalue}{life}[/tex]
Depreciation per year = [tex]\frac{55,736,000-5,573,600}{15}[/tex]
Depreciation per year = $3,344,160
Depreciation for 3 years = $3,344,160 x 3
Depreciation for 3 years = $10,032,480
Three years accumulated depreciation for three years would be $10,032,480
15. Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 10% was $81,100. Ten annual lease payments of $12,000 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $66,000, and its retail fair value was $81,100. What amount of interest revenue from the lease should Smith Co. report in its December 31, 2021, income statement
Answer: $3,455
Explanation:
The interest received by Smith can be calculated as;
Interest Value = Present value of lease payment * interest rate
Present Value of interest rate
Ten annual lease payments of $12,000 are due each year beginning July 1, 2021.
That means first payment has been made already. Present value is;
= 81,100 - 12,000
= $69,100
Only half a year has gone by so this will need to be reflected;
Interest Value = Present value of lease payment * interest rate
= 69,100 * 10% * 6/12
= $3,455
8. A home inspection performed by a licensed inspector is
O a. a limited visual survey and basic performance evaluation of systems in house.
ob. a full visual survey to ensure the house meets building code standards.
c. a comprehensive investigation of the house using specialized equipment.
o d. an exploratory probe to determine the cause or effect of deficiencies noted.
Answer:
a. a limited visual survey and basic performance evaluation of systems in house.
Explanation:
A home inspection must be carried out by a certified and licensed inspector, but it is not a comprehensive investigation nor an exploratory probe of the house. It is basically a limited visual inspection carried out to determine if the house's systems (air conditioner, plumbing, and electrical) work properly, as well as to determine the condition of the walls, roof, windows, and other components of the house. A home inspection is generally requested when a house i being sold.
Do you think that customers are impressed with the effort that Gap has made to respond to the need to have more worker friendly suppliers? Explain your answer.
Answer:
Yes, I think that customers are very impressed with their customer service
Explanation:
I'm impressed.
"A customer owns 200 shares of ABC, purchased 2 years ago at $50 per share. The current market value of ABC stock is $60 per share. If the customer gifts the stock to his son, the result is the:"
Answer: The donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.
Explanation:
From the question, we are informed that a customer owns 200 shares of ABC, that were bought 2 years ago at $50 per share and that the current market value of ABC stock is $60 per share.
If the customer gifts the stock to his son, the result is the donor may incur a gift tax liability. Also, the cost basis will be $50 per share to the recipient of the gift.
Required information [The following information applies to the questions displayed below.] Simon Company’s year-end balance sheets follow.
At December 31 2017 2016 2015
Assets Cash $ 31,800 $ 35,625 $ 37,800
Accounts receivable, net 89,500 62,500 50,200
Merchandise inventory 112,500 82,500 54,000
Prepaid expenses 10,700 9,375 5,000
Plant assets, net 278,500 255,000 230,500
Total assets $ 523,000 $ 445,000 $ 377,500
Liabilities and Equity
Accounts payable $ 129,900 $ 75,250 $ 51,250
Long-term notes payable secured by
mortgages on plant assets 98,500 101,500 83,500
Common stock, $10 par value 163,500 163,500 163,500
Retained earnings 131,100 104,750 79,250
Total liabilities and equity $ 523,000 $ 445,000 $ 377,500
The company’s income statements for the years ended December 31, 2017 and 2016, follow.
For Year Ended December 31 2017 2016
Sales $ 673,500 $ 532,000
Cost of goods sold $ 411,225 $ 345,500
Other operating expenses 209,550 134,980
Interest expense 12,100 13,300
Income taxes 9,525 8,845
Total costs and expenses 642,400 502,625
Net income $ 31,100 $ 29,375
Earnings per share $ 1.90 $ 1.80
Calculate the company’s long term risk and capital structure positions at the end of 2015 and 2014 by computing the following ratios.
(1) Debt and equity ratios.
(2) Debt to equity ratios.
Answer:
(1) Debt and equity ratios. (I guess the years should be 2017 and 2016)
debt ratio = liabilities / assets
equity ratio = stockholder's equity / assets
debt ratio 2016 = $155,750 / $411,250 = 37.87%
debt ratio 2017 = $202,575 / $484,000 = 41.85%
equity ratio 2016 = $255,500 / $411,250 = 62.13%
equity ratio 2017 = $281,425 / $484,000 = 58.15%
(2) Debt to equity ratios. (2017 and 2016)
debt to equity ratio = liabilities / stockholders' equity
debt to equity ratio 2016 = $155,750 / $255,500 = 60.96%
debt to equity ratio 2017 = $202,575 / $281,425 = 71.98%
Explanation:
average liabilities 2017 = ($129,900 + $75,250 + $98,500 + $101,500) / 2 = $202,575
average liabilities 2016 = ($75,250 + $51,250 + $101,500 + $83,500) / 2 = $155,750
average assets 2017 = ($523,000 + $445,000) / 2 = $484,000
average assets 2016 = ($445,000 + $377,500) / 2 = $411,250
average stockholders' equity 2017 = $484,000 - $202,575 = $281,425
average stockholders' equity 2016 = $411,250 - $155,750 = $255,500
The Whistling Straits Corporation needs to raise $74 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $45 per share and the company's underwriters charge a spread of 6 percent. If the SEC filing fee and associated administrative expenses of the offering are $825,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)
Answer:
1,768,913 new stocks
Explanation:
the company needs to raise amount needed to finance expansion plus SEC's filing and administrative fees = $74,000,000 + $825,000 = $74,825,000
net amount received per stock issued = stock price x (1 - underwriting fee) = $45 x (1 - 6%) = $42.30 per stock
the company needs to issue = $74,825,000 / $42.30 per stock = 1,768,912.53 = 1,768,913 new stocks
Internal or External Acquisitions:
No Opportunity Costs
The Van Division of MotoCar Corporation has offered to purchase 180,000 wheels from the Wheel Division for $40 per wheel. At a normal volume of 500,000 wheels per year, production costs per wheel for the Wheel Division are as follows:
Direct materials $15
Direct labor 11
Variable overhead 6
Fixed overhead 18
Total $50
The Wheel Division has been selling 500,000 wheels per year to outside buyers at $60 each. Capacity is 700,000 wheels per year. The Van Division has been buying wheels from outside suppliers at $56 per wheel.
(a) Calculate the net benefit (or cost) to the Wheel Division of accepting the offer from the Van Division.
(b) Calculate the net benefit (or cost) to Motocar Corp. if the Wheel Division accepts the offer from the Van Division.
Answer:
A. Profit per wheel = $8
B. Total benefit to Motor Corp. = $4,320,000
Explanation:
Requirement A
We can calculate the net benefit/cost to the wheel division of accepting the offer from van division by deducting all the variable cost from the selling price offered by van division
Selling price = $40
Direct material = $15
Direct labor = $11
Variable Overhead = $6
Profit per wheel = $8
Requirement B Net benefit to Motor car corp.
Increased the profit of wheel division by accepting the offer
180,000 x $8 =$1,440,000
Savings of van division by placing an order to wheel division
180,000 x $16(w) = $2,880,000
Total benefit to Motor Corp. = $1,440,000 + $2,880,000
Total benefit to Motor Corp. = $4,320,000
Working
Outside supplier price - Price offered by van division
$56 - $40
$16