Answer:
The insurance company would only sell the Select Policy insurance to a smoker with systolic blood pressure of 230 if after carrying out a medical test, t was found out that, the probability of him or her having a stroke is actually less than 0.01.
This is to insure that, the smoker didn't capitalise on his dying nature in-order to obtained the insurance thereby defrauding the insurance company.
Explanation:
Nakatomi Corporation produces 10,000 units of Product A at a cost of $20 per unit. A detailed breakdown of the cost is below. Choose the correct answer from the options provided. Per Unit Variable costs $ 12 Allocated manufacturing overhead costs 3 Allocated general administrative costs 5 $ 20 Outside supplier's offer $ 17 What are the total relevant cost of producing the units internally
Answer:
$120,000
Explanation:
Calculation for the total relevant cost of producing the units internally
Using this formula
Total relevant cost = Variable costs per unit*Units Produce
Let plug in the formula
Total relevant cost=$12 per unit* 10,000 units
Total relevant cost=$120,000
Therefore the total relevant cost of producing the units internally will be $120,000
How much of the contract price should Maya allocate to the machine, installation, and training, respectively?
Answer:
I looked for the missing information and found the following:
total contract price = $920,000
individual prices:
machine = $800,000 installation = $100,000training = $100,000total = $1,000,000Maya should allocate each performance obligation in the same proportion as if they were sold separately:
machine = ($800,000 / $1,000,000) x $920,000 = $736,000installation = ($100,000 / $1,000,000) x $920,000 = $92,000training = ($100,000 / $1,000,000) x $920,000 = $92,000Ernest is applying for a carpentry apprenticeship program. He must take a test involving mathematical calculations including working with fractions and geometry. This is illegal because carpentry is a manual labor job and these tests are cognitive and not job-related.
A. True
B. False
Answer:
B. False
Explanation:
Since in the question, it is mentioned that Erney applied for a carpentry apprenticeship program. Also he took the test. This is not a illegal as if he wants to work in two specialized field than he could co but the work should be legal in nature and both the work are legal itself
Hence, the given statement is false
If I currently sell 10,000 units, and my use of Formula 1 indicates that I will need to sell 500 additional units to justify my suggested change to the marketing mix, what percentage of sales does that represent
Answer:
It represents a 5% change to the marketing mix.
Explanation:
The change = 500/10,000 x 100 = 5%.
Company A's change in a variable can be compared with another index, by expressing the change (addition) as a percentage of the index. For instance, the sale of 10,000 units is an index. The additional 500 units that is needed to be sold represent the change. In percentage terms, the change can be divided by the index and then multiplied by 100.
Daniel owns his own computer repair shop. Business has not been good, so Daniel's credit limit has been exhausted, and he needs a short-term loan to help him stay in business. Which institution, known as the lender of last resort, would Daniel most likely turn to for a loan
The institution that is called the lender of the last resort is the finance company.
The following information should be relevant:
Daniel should be converted into a finance company where the business provides short-term loans at high-interest rate as compared to the banks. Due to the high-interest rate, the financial companies should be treated as the lender of last resort for an individual & the businesses where the credit limit could be exhausted having poor credit ratings.So, the rest of the options are incorrect.
Therefore we can conclude that the institution that is called the lender of the last resort is the finance company.
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Wookie Company issues 8%, five-year bonds, on January 1 of this year, with a par value of $108,000 and semiannual interest payments.
Semiannual Period-End Unamortized Premium Carrying Value
(0) January 1, issuance $8,271 $116,271
(1) June 30, first payment 7,444 115,444
(2) December 31, second payment 6,617 114,617
Use the above straight-line bond amortization table and prepare journal entries for the following:
a) The issuance of bonds on January 1.
b) The first interest payment on June 30.
c) The second interest payment on December 31.
Answer:
See the journal entries and explanation below.
Explanation:
The journal entries will look as follows
a) The issuance of bonds on January 1.
Date Accounts title Debit ($) Credit ($)
Jan. 1 Cash 111,671
Premium on Bonds Payable 8,271
Bonds Payable (w.1) 108,000
(To record issuance of bonds.)
b) The first interest payment on June 30.
Date Accounts title Debit ($) Credit ($)
Jun. 30 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.2) 827
Cash (w.3) 4,320
(To record first interest payment)
c) The second interest payment on December 31.
Date Accounts title Debit ($) Credit ($)
Dec. 31 Interest Expense (w.4) 3,493
Premium on Bonds Payable (w.5) 827
Cash (w.6) 4,320
(To record second interest payment)
Workings:
w.1: Bond payable = Cash - Premium on Bonds Payable = $111,671 - $8,271
w.2: Premium on Bonds Payable = January 1 Unamortized Premium - June 30 Unamortized Premium = $8,271 - $7,444 = $827
w.3: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.4: Interest expense = w.3 - w.2 = $4,320 - $827 = $3.493
w.5: Premium on Bonds Payable = June 30 1 Unamortized Premium - December 31 Unamortized Premium = $7,444 - $6,617 = $827
w.6: Cash = $108,000 * 8% * (6 / 12) = $4,320
w.7: Interest expense = w.6 - w.5 = $4,320 - $827 = $3,493
On March 15, 20X7, Barrel Company paid property taxes of $120,000 on its factory building for calendar year 20X7. On July 1, 20X7, Barrel made $20,000 in unanticipated repairs to its machinery. The repairs will benefit operations for the remainder of the calendar year. What total amount of these expenses should be included in Barrel's quarterly income statement for the three months ended September 30, 20X7?
Answer:
Total expenses = $40,000
Explanation:
Total expenses for the quarterly income statement for the three months can be calculated as follows
Data
Property taxes paid = $120,000
Unanticipated repairs = $20,000
Expenses for quarterly income statement =?
Solution
Total expenses = Property taxes paid + Unanticipated repairs
Total expenses = ($120,000 x 3/12) + ($20,000 x 3/6)
Total expenses = $30,000 + $10,000
Total expenses = $40,000
Total expenses of $40,000 should be included in Barrel's quarterly income statement for the three months ended September 30, 20X7
Name 2 of the 4 structures a business can have
Answer:
4 Types of Legal Structures for Business:
Sole Proprietorship. General Partnership. Limited Liability Company (LLC) Corporations (C-Corp and S-Corp)When auto manufacturer BMW purchased the RollsRoyce brand name, BMW had to hire and train a new staff of assembly workers. The new workers were paid per hour, worked a total of hours, and produced cars. BMW budgeted for a standard labor rate of per hour and direct labor hours per car. What is the direct labor rate variance for the RollsRoyce division?
Complete Question:
When auto manufacturer BMW purchased the Rolls-Royce brand name, BMW had to hire and train a new staff of assembly workers. The new workers were paid $25 per hour, worked a total of 7,500 hours, and produced 2,000 cars. BMW budgeted for a standard labor rate of $27 per hour and 1.25 direct labor hours per car.
What is the direct labor rate variance for the Rolls-Royce division?
Answer:
$15,000 Favorable Variance
Explanation:
As we know that:
Labor Rate Variance = (Actual Rate per Hour − Standard Rate per Hour) * Actual Hours Worked
If we consider the parenthesis elements in the formula, we can decide whether the variance is favorable or adverse. If the actual cost is higher than the budget (standard) then the variance (difference) is adverse and vice versa.
Here
Actual rate per hour is $25 per Hour
Standard rate per hour is $27 per Hour
Actual Hours Worked are 7,500 Hour
By putting values, we have:
Labor Rate Variance = ($25 − $27) * 7,500 Hrs
Labor Rate Variance = ($2 per share) * 7,500 Hrs
Labor Rate Variance = $15,000 Favorable
As the actual labor rate is lower than the standard rate hence the variance is favorable.
How does technological change affect industry evolution? And how should firms manage product adoption and diffusion?
Answer:
How does technological change affect industry evolution?
Technological change greatly affects industry evolution. It is perhaps the most important factor in industry evolution, because technological advancements create new industries, and cause the death of other industries.
For example, the telephone industry replaced the telegraph industry, and the internet has made many technologies obsolete.
And how should firms manage product adoption and diffusion?
Firms should manage product adoption and diffusion in a strategic matter. Firms should look for new products with some anticipation in other to make a profit on customer and technological trends. Firms should also establish when to discard old products that are becoming obsolete in the market.
Mark Ward is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2007, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Ward had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Ward in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Ward appears inclined to accept the Railroad's offer. The Railroad's 2007 financial statements should include the following related to the incident:_________
A. recognition of a loss and creation of a liability for the value of the land.
B. disclosure in note form only.
C. recognition of a loss only.
D. creation of a liability only.
Answer:
A. recognition of a loss and creation of a liability for the value of the land.
Explanation:
This is because, in the financial statement of the Railroad company, it goes to show the financial dealings which the company had within the fiscal year under review. Since, the Northern Railroad Company and Mark Ward has reached an agreement, the best would be the recognition of the loss and create a liability for the value of the land in their financial statement. It will afford the investors to be aware of the assets and liability of the company at the present time.
A short margin account with the only position being 100 shares of ABC stock, shows the following:
Credit Balance: $18,000
Short Mkt Value: $12,000
Equity: $6,000
If ABC pays a dividend of $2.00 per share, the result will be an adjusted:__________
Answer:
1.1'00
Explanation:
Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows: T-bond = 7.72% A = 9.64% AAA = 8.72% BBB = 10.18% The differences in rates among these issues were most probably caused primarily by:
Answer:
Investors are risk averse, which means that they are willing to invest in low risk projects or investments. In order for an investor to invest in a riskier project, he/she will expect to receive higher returns to compensate for the extra risk. US Treasury bonds are probably the safest investments in the world, that is why they yield the lowest interest rate. AAA bonds are less risky than BBB bonds, which in turn are less risky than CCC bonds. That is why AAA bonds yield a lower return than BBB bonds, and BBB bonds yield a lower return than CCC bonds.
Competitive markets ______ goods with positive externalities and ______ goods with negative externalities. Group of answer choices overprovide; underprovide underprovide; overprovide overprovide; overprovide underprovide; underprovide
Answer:
underprovide; overprovide
Explanation:
A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.
A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation
Provident Bank offers a 10-year CD that earns 2.15% compounded continuously. If $10,000 is invested in this CD, how much will it be worth in 10 years
Answer:
the CD will be worth $12,370.40 in 10 years time.
Explanation:
The Future Value is the term given to the amount that a dollar invested today would be worth in the future.
The Future Value of the CD can be determined as follows :
PV = - $10,000
n = 10
i = 2.15 %
Pmt = $ 0
P/yr = 1
FV = ?
Using a financial calculator,the future value (FV) of the CD in 10 years time will be : $12,370.40
Milano Gallery purchases the copyright on an oil painting for $510,000 on January 1, 2017. The copyright legally protects its owner for 12 more years. The company plans to market and sell prints of the original for 19 years.
Requried:
Prepare entries to record the purchase of the copyright on January 1, 2017, and its annual amortization on December 31, 2017.
Answer:
See journal entries below.
Explanation:
The copy right is known as an intangible asset that is purchased to a business hence debited to factor in its purchase value while the bank is credited for the payment for the purchase.
Although the copyright is amortized for 12 years, the copyright protection expires after 12 years - which is the legal year irrespective of its plan to market and sell the painting for 19 years.
• Entries to record to record the purchase of copyrights on January 1, 2017.
Date
January 1,2017
Copyright Dr $510,000
Bank Cr $510,000
(Being purchase of 12 years painting copyrights)
• Annual amortization on December 31, 2017
December 31, 2017
Amortization Dr $42,500
Copyright Cr $42,500
(Being annual amortization cost on 12 years painting copyright)
Calculation of national output at Market Prices is known as _________
a.
Real GDP
b.
Nominal GDP
c.
Non-monetary income
d.
None of these
Answer:
A
Explanation:
Guardian Corporation has two major divisions-Healthcare Products and Pharmaceutical Products. It provides the following information for the year Pharmaceutical Division Healthcare Division $150,000 $47.000 $310,000 $1,000,000 $218,400 $5,660,000 13 0% sales ating income age assets Target rate of return 13 0% Calculate the residual income for the Healthcare Division.
a. $47 000
b. $6700
c. $27.500
d. $103,000
Answer:
Residual income =$6,700
Explanation:
Residual income is the excess of the controllable profit over the opportunity cost of capital invested.
It is used to evaluate the financial performance of a division or department.
The a positive residual value indicate a good performance, hence the higher the residual value the better
It is computed as follows:
Residual income = Controllable profit - (cost of capital× operating assets)
Controllable profit = 47,000
Interest on capital = × 13% × 310,000 = 40300
Residual income = 47,000 - 40,300 = 6700
Residual income =$6,700
A registered representative ("rr") is an MFP of a municipal securities firm that is an underwriter for that municipal issuer. The MFP volunteers his time to the election campaign of a candidate for mayor of the issuer by offering to host a reception. The "rr," who is entitled to vote in the election, does not make a contribution to the elected official’s campaign, but does pay $300 of "out of pocket" expenses for the cost of the reception. Which statement is TRUE?
Answer:
The $300 of out of pocket expense exceeds the MSRB political contribution limit and will result in the municipal securities firm being banned as an underwriter for that issuer for 2 years.
Explanation:
The municipal securities firm is is underwriter for municipal issuer. The volunteers have paid $300 out of pocket but they are not entitled to make contribution to the campaign. This will result the firm being banned for two years as an underwriter for the issuer.
"The internal rate of return method differs from the net present value method in that it results in finding the" ___________________ of the potential investment.
Answer: profitability
Explanation: The internal rate of return method differs from the net present value method in that it results in finding the profitability of the potential investment.
In capital budgeting which is the process by which companies determine whether a new investment or expansion opportunity is worthwhile and if undertaken, could either yield net profits or losses for the company, both the net present value (NPV) (present value of cash inflows minus the present value of cash outflows over a given period time) and the internal rate of return (IRR) methods are employed.
How does the IRR method determine profitability? - This it does by using a percentage value rather than a dollar amount and therefore is advantageous in representing the possible returns of investments by comparing it with other alternative investments.
Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also.
Required:
Indicate the reporting classification of each transaction by entering the appropriate classification code. (The first item is provided as an example.)
Classifications
+ I Investing activity (cash inflow)
– I Investing activity (cash outflow)
+ F Financing activity (cash inflow)
– F Financing activity (cash outflow)
N Noncash investing and financing activity
X Not reported as an investing and/or a financing activity
Classifications Transactions
+I 1. Sale of land.
2. Issuance of common stock for cash.
3. Purchase of treasury stock.
4. Conversion of bonds payable to common stock.
5. Lease of equipment.
6. Sale of patent.
7. Acquisition of building for cash.
8. Issuance of common stock for land.
9. Collection of note receivable (principal amount).
10. Issuance of bonds.
11. Issuance of stock dividend.
12. Payment of property dividend.
13. Payment of cash dividends.
14. Issuance of short-term note payable for cash.
15. Issuance of long-term note payable for cash.
16. Purchase of marketable securities ("available for sale").
17. Payment of note payable.
18. Cash payment for five-year insurance policy.
19. Sale of equipment.
20. Issuance of note payable for equipment.
21. Acquisition of common stock of another corporation.
22. Repayment of long-term debt by issuing common stock.
23. Payment of semiannual interest on bonds payable.
24. Retirement of preferred stock.
25. Loan to another firm.
26. Sale of inventory to customers.
27. Purchase of marketable securities (cash equivalents).
Answer:
Investing Activities refer to cashflow activities that have to do with Fixed assets as well as the ownership of the securities of other companies.
Financing Activities refer to cashflow activities that have to do with how the company sources funds for the company so this includes Equity related activities and long term liabilities.
1. Sale of land. +I
2. Issuance of common stock for cash. +F
3. Purchase of treasury stock. -F
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
6. Sale of patent. +I
7. Acquisition of building for cash. -I
8. Issuance of common stock for land. N
9. Collection of note receivable (principal amount). +I
10. Issuance of bonds. +F
11. Issuance of stock dividend. X
12. Payment of property dividend. X
13. Payment of cash dividends. -F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
16. Purchase of marketable securities ("available for sale"). -I
17. Payment of note payable. -F
18. Cash payment for five-year insurance policy. X
19. Sale of equipment. +I
20. Issuance of note payable for equipment. N
21. Acquisition of common stock of another corporation. -I
22. Repayment of long-term debt by issuing common stock. N
23. Payment of semiannual interest on bonds payable. X
24. Retirement of preferred stock. -F
25. Loan to another firm. -I
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
Please see appropriate classification below.
+ I Investing activity (cash inflow)
1. Sale of land. +I
6. Sale of patent. +I
9. Collection of note receivable (principal amount). +I
19. Sale of equipment. +I
– I Investing activity (cash outflow)
7. Acquisition of building for cash. -I
16. Purchase of marketable securities ("available for sale"). -I
21. Acquisition of common stock of another corporation. -I
25. Loan to another firm. -I
+ F Financing activity (cash inflow)
2. Issuance of common stock for cash. +F
10. Issuance of bonds. +F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
– F Financing activity (cash outflow)
3. Purchase of treasury stock. -F
13. Payment of cash dividends. -F
17. Payment of note payable. -F
24. Retirement of preferred stock. -F
N Noncash investing and financing activity
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
8. Issuance of common stock for land. N
20. Issuance of note payable for equipment. N
22. Repayment of long-term debt by issuing common stock. N
X Not reported as an investing and/or a financing activity
11. Issuance of stock dividend. X
12. Payment of property dividend. X
18. Cash payment for five-year insurance policy. X
23. Payment of semi-annual interest on bonds payable. X
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
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Suppose when the price of coffee beans goes from $1 to $1.20 per pound, production increases from 90 million pounds of coffee beans to 110 million pounds per year. Using the mid-point method, the percentage change in quantity supplied is: Multiple Choice 20 percent 18 percent 0.6 6.0
Answer: 20%
Explanation:
Using the midpoint formula, the denominator is an average of the beginning and ending figures;
= [tex]\frac{Q2 - Q1}{Q2 + Q1 /2 } * 100[/tex]
= [tex]\frac{110 - 90}{(110 + 90)/2} * 100[/tex]
= [tex]\frac{20}{100} * 100[/tex]
= 20%
Investing $1,500,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $163,290,917. Assuming similar sales next year, the 1.7% increase in demand will provide $2,775,946 of additional revenue. With the overall contribution margin of 34.1%, after direct costs this revenue will add $946,598 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $1,500,000 TQM investment, rounded to the nearest month
Answer:
Payback = 19 month
Explanation:
Firm has invested in TQM's Channel Support systems of $1,500,000, It will increase demand of product by 1.7%.
Last years sales revenue was $163,290,917, a 1.7% increase will mean the sales will be:
= $163,290,917 * (1+0.017)
= $163,290,917 * (1.017)
= $166,066,862.59
Thus increase in sales revenue is:
= $166,066,862.589 - $163,290,917
= $2,775,945.589
Now consider contribution margin. From Total Sales, direct variable costs are deducted to get total contribution. The Overall contribution margin is It is 34.1%.
So extra contribution due to 1.7% increase in sales is = $2,775,945.589 * 34.1%
= $946,597.45
Thus increase in contribution margin will also increase profit to the same extent as there is no addition in fixed cost due to this project. So firm will be able to recover $946,597.45 of initial investment of $1,500,000 in one year.
Pay back is the time required to recover this full initial investment. It ascertained by dividing $1,500,000 amount by the net addition in profit per year.
Payback = $1,500,000 / $946,597.45
Payback = 1.585 per year * 12 month
Payback = 19.02 month
Payback = 19 month approximately
For an automobile company, the total overhead applied was $48,000,000 at the end of the year. Actual overhead was $52,850,000. Closing over/under applied overhead into cost of goods sold would cause net income to:
Answer:
Net income decreased by $4,850,000.
Explanation:
Given total overhead applied = $48000000
The actual overhead = $52850000
Over/under Applied overhead = total overhead applied - Actual overhead at the end of the year.
Over / under Applied overhead = 48000000-52850000
Over / under Applied overhead = -$4850000
From the calculation, it can be seen that the overhead is underapplied therefore when under applied overhead allocated to cost of goods sold then cost of goods sold decreased by $4850000.
The primary responsibility for establishing and maintaining internal control rests with
А
The controller
В.
The internal auditor
С
The treasurer
D
Management
Answer:
D
Explanation:
Management is responsible for establishing and maintaining internal control to achieve the objectives of effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations.
Informal groups: Group of answer choices exist primarily for the benefit of their members. perform routine organizational goals. perform uncommon tasks of the organization. always have a high level of interdependence. are initiated by the organization for special purposes.
Answer:
exist primarily for the benefit of their members.
Explanation:
Informal groups in an organization are created when individuals form a bond based on the experience that they share, they appear from friendship and not by rules inside the company but they influence how people interact and how they perform their job. Also, companies promote the apperance of these groups because they help people interact and improve their communication. According to that, the answer is that informal groups exist primarily for the benefit of their members as they are created by the friendship between employees and not by the company.
The other options are not right because informal groups don't perform routine organizational goals or uncommon tasks of the organization, they don't have a high level of interdependence and they are not initiated by the organization for special purposes because they are created by the employees and are not part of the company's structure.
Swan Textiles Inc. produces and sells a decorative pillow for $98.00 per unit. In the first month of operation, 2,200 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $24.00 per unit Variable marketing costs $5.00 per unit Fixed manufacturing costs $13.00 per unit Administrative expenses, all fixed $21.00 per unit Ending inventories: Direct materials −0− WIP −0− Finished goods 400 units What is the operating income using variable costing?
Answer:
Net operating profit= 57,800
Explanation:
Giving the following information:
Selling price= $98
Units sold= 1,800
Variable manufacturing costs $24.00 per unit
Variable marketing costs $5.00 per unit
Fixed manufacturing costs $13.00 per unit
Administrative expenses, all fixed $21.00 per unit
First, we need to calculate the total fixed costs:
Total fixed manufacturing cost= 13*2,200= 28,600
Total administrative cost= 21*1,800= 37,800
Variable costing income statement:
Sales= 98*1,800= 176,400
Total variable cost= 1,800*(24 + 5)= (52,200)
Contribution margin= 124,200
Total fixed manufacturing cost= (28,600)
Total administrative cost= (37,800)
Net operating profit= 57,800
Bronn and Jaime make a written contract where Jaime will sell Bronn his armor and sword for $1,200.
Which of the following is not a defense to the formation of the contract?
Group of answer choices
A. fraud
B. illegality
C. incapacity
D. unconscionability
E. mirror image rule
Answer: Mirror image rule
Explanation:
It should be noted that the contract formation defenses are fraud, illegality, incapacity, unconscionability, duress and statute of Frauds.
The mirror image rule is not among the defense to the formation of w contract. It implies that an offer should be accepted with no changes made to the offer.
g If the risk-free rate is 5%, return on the market is 8%, and beta is 0.5, a stock with a return of 7% is likely: Group of answer choices Correctly valued Undervalued None of the options Overvalued
Answer:
The stock is undervalued. As the required rate of return (6.5%) on market is less than the actual return (7%), the stock is said to be undervalued as it provides an actual return greater than the required rate of return.
Explanation:
To check if a stock is over valued, undervalued or correctly valued, we simply compare the required rate of return on a stock as measured by CAPM with the actual return on the stock.
We can calculate the required rate of return using CAPM equation. The formula for required rate of return under CAPM is,
r = rRf + Beta * (rM - rRF)
Where,
rRf is the risk free raterM is the return on marketr = 0.05 + 0.5 * (0.08 - 0.05)
r = 0.065 or 6.5%
As the required rate of return on market is less than the actual return, the stock is said to be undervalued as it provides an actual return greater than the required rate of return.
Answer:
Undervalued
Explanation:
to determine if the stock is overvalued or undervalued, we have to determine the expected rate of return using the CAPM and compare it with the return of the stock
Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
5% + 0.5(8% - 5%) = 6.5%
the stock is undervalued because 6.5% is less than 7%
SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon with new potatoes and mixed vegetables. During the most recent week, the company prepared 4,800 of these meals using 2,350 direct labor-hours. The company paid its direct labor workers a total of $23,500 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $9.40 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 4,800 meals? 2. What is the standard labor cost allowed (SH × SR) to prepare 4,800 meals? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance?
Answer:Please find answers in the explanation column
Explanation:
a)standard labor-hours allowed (SH) to prepare 4,800 meals
standard labor-hours =Actual output X standard direct labor hours
4,800 X 0.50 = 2,400hours
B) standard labor cost allowed
direct labor-hours per houR = $9.40
standard labor-hours = 2,400
standard labor cost =direct labor-hours per houR xstandard labor hours
= $9.40 x 2,400= $22,560
c) labor spending variance= Actual cost incurred - Standard Labor cost
= 23,500 - 22,560= 940 -- Which is unfavorable because the actual is cost is greater than the standard labor cost
D)the labor rate variance and the labor efficiency variance?
labor rate variance= (Actual rate - standard rate ) X Actual hours
($10.00 -$9.40) X 2,350= $1,410
Labor efficiency variance=(Actual hrs - standard hrs allowed) x standard rate
2,350- 2,400) X $9.40= $470 --- Favourable as the actual hours used is less than the standard hours .