Answer:
a) $96 per unit
b) $224 per unit
c) 70%
Explanation:
We will have to compute variable cost and contribution margin
Sales $2,400,000
7,500 × 320
Less; Variable cost $720,000
Contribution margin $1,680,000
Less : Fixed cost $120,000
Operating income. $1,560,000
a) Variable cost per unit
= Total variable cost ÷ Total number of units
= $720,000 ÷ 7,500 units
= $96 per unit
b) Unit contribution margin
= Selling price per unit - Variable cost per unit
= $320 - $96
= $224
c) Contribution margin ratio
= (Selling price per unit - Variable cost per unit) ÷ Selling price per unit × 100
= ($320 - $96) ÷ $320 × 100
= $224 ÷ 320 × 100
= 70%
The_______hypothesis postulates that top managers typicalljy overstate their ability to create value from acquisition primarily because rising to the top of a corporation has given then an exaggerated sense of the own capabilities.
a. recognition.
b. optimistic.
c. hybrid.
d. hubris.
Answer:
Option D
Hubris hypothesis
Explanation:
The hubris hypothesis attempts to explain the effect of overconfidence at a managerial level, and how it affects business practices negatively. It can lead to several actions like rash decisions, expensive company acquisitions, and buy-outs e.t.c.
In summary, it tries to explain the effect of pride on clear reasoning and progress at a managerial level in companies.
Therefore, it fits perfectly into the sentence in the question above, as the question is explaining the effect of pride on the performance of newly promoted managers.
Option D is the correct answer
Explain the manufacturing flow management process and the relationship among manufacturers' production capabilities and costs, suppliers, shippers, and demand for goods. Briefly define and explain the differences between lean and agile supply chain strategies.
Answer:
The difference between lean and agile is the fluidity with the response to the market. A lean supply chain focuses on cutting costs by producing high volumes of products with low variability. An agile supply chain focuses on responding to the market demand with smaller, customizable batches of items.
A lean supply chain prioritizes cost reduction by producing goods in large quantities and with little variation. An agile supply chain focuses on producing things in smaller, more individualized quantities in response to market demand.
What is a supply chain?The entire process from when a consumer places an order to when the goods or service is delivered and paid for is known as the supply chain. The value and supply chains are coordinated and optimized by the supply chain manager.
He is in charge of ensuring the flawless operation of every process, from the acquisition of raw materials to production, logistics, and client delivery.
As a result, the company, its customers, and its customers' customers are all included in the supply chain. A supply network accounts for the possibility that one of the providers is also a supplier to a customer or even the final consumer.
The monitoring of all resources, data, and finances used in the production process, from the supplier to the manufacturer to the merchant and consumer, is referred to as supply chain management (SCM) or supply chain management.
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2. Whom would you choose as a referent on this job? What steps would your manager take to make you feel that you were being equitably treated? What would you do if, after a year on the job, you experienced underpayment equity?
Answer is given below
Explanation:
The comparison is an indication to determine if the treatment is the same. Mentioned may be another person or a group of people similar to them. The Reference Canal may be a person with a previous job or anyone has guesses as to what the result/input ratio will be. Employees are treated equally when they feel that their result / input ratio is equal to the output or input ratio mentioned. Equity is related to the fairness of the results relative to the inputs. Managers help treat employees equally by ensuring that those who provide multiple inputs are rewarded with more results than those who provide less input. If a person changes one aspect of his ratio, the manager must ensure that the other side of the ratio also changes. As the input increases, so does the outcomhold. If the input decreases, the results also decrease. Equity is present when an individual's own result / input ratio is less than the forecast. This happens when an employee compares him or her to a reference and does not want to achieve the results he or his investment has achieved. Equity can be restored by trying to increase growth (by inputs, bonuses or allocating time) or by removing inputs (being late or falling short, doing less work) and turning it into a more accurate indication. If these methods fail, a planned company will choose to departA company retired $80 million of its 10% bonds at 104 ($83.2 million) before their scheduled maturity. At the time, the bonds had a remaining discount of $2 million. Prepare the journal entry to record the redemption of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
Cr Discount on bonds payable 2.0
Cr Cash 83.2
Explanation:
Preparation of the journal entry to record the redemptionnof the bonds
Based on the information given we were told that the company retired the amount of $80 million with a 10% bonds at 104 ($83.2 million) and as well had a remaining discount of $2 million, which means that the transaction will be recorded as:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
[(83.2+2.0)-80.0]
Cr Discount on bonds payable 2.0
Cr Cash 83.2
Old Tired Professor Mullen, Inc. has $20,000 of ending (EI) finished goods inventory. If beginning (BI) finished goods inventory was $10,000 and Cost of Goods Sold (CGS) (OUT) was $40,000, how much would the Old Tired Professor report for Cost of Goods Manufactured (CGM) (IN)
Difference between beginning and ending CoG: 20,000-10,000 = 10,000
Difference + sold:
10,000 + 40,000 = 50,000
Answer: $50,000
Northwest Fur Co. started 2021 with $105,000 of merchandise inventory on hand. During 2021, $510,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $8,900. Merchandise with an invoice amount of $3,700 was returned for credit. Cost of goods sold for the year was $362,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases
Answer:
The ending inventory by using the gross method is $243,011
Explanation:
Purchases = Net purchases + Freight inwards
Purchases = 491,111 + 8,900
Purchases = 500,011
When Net purchase = Gross Purchase - Purchase return - Discount
Net purchase = 510,000 - 3,700- 15,189
Net purchase = 491,111
Working
Discount = (Purchases - Purchase return) × Discount rate
Discount = (510,000 - 3,700) * 3%
Discount = 15,189
Ending inventory = Beginning inventory + Purchases− Cost of good sold
Ending inventory = (105,000 + 500,011) - 362,000
Ending inventory = $243,011
Thus, the ending inventory by using the gross method is $243,011.
MAD’s target capital structure is 60 percent debt and 40 percent equity. The yield to maturity on the company’s new debt will be 10 percent. MAD’s beta is 1.7, the risk free rate is 4% and the required market return is 12%. If the company’s tax rate is 30 percent, then which of the projects will be accepted?
Answer: D) Projects A and C
Explanation:
The projects to be taken should have a higher IRR than the company's Weighted Average Cost of Capital.
Cost of Equity
= Risk free rate + beta( market return - risk free rate)
= 4% + 1.7 (12% - 4%)
= 17.6%
After tax cost of debt
= Yield ( 1 - tax rate)
= 10% * ( 1 - 30%)
= 7%
WACC = (Weight of debt * after tax cost of debt) + (weight of equity * cost of equity)
= (0.6 * 7% ) + ( 0.4 * 17.6%)
= 4.2% + 7.04%
= 11.24%
Projects A and C both have IRR higher than the company's WACC and so should be accepted.
Which of the following statements about collateral contracts is true? Group of answer choices The guarantor promises to pay only if the principal debtor fails to do so. The principal debtor's debt is secondary. A collateral contract involves three parties and one promise to perform. The guarantor's debt is primary.
Answer:
The principal debtor's debt is secondary
Explanation:
The collateral contracts involves three parties and one promise to perform.
What is a Collateral Contract?A collateral contract is a separate contract which exists beside the main contract. Largely, where a written contract, the term of agreement base on the contract.
The collateral contracts are independent oral or written contracts that are made between two parties to a separate agreement or between one of the original parties and a third party.
This type of contract is usually made before or simultaneously with the original contract.
A collateral contract is a secondary agreement added to the original contract that is meant to ensure that the pre-contract promise are met.
Collateral contracts contain terms that conflict with the terms of the primary agreement.
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You find a zero coupon bond with a par value of $10,000 and 21 years to maturity. The yield to maturity on this bond is 4.3 percent. Assume semiannual compounding periods.What is the price of the bond?
Answer:
Price of bond $4,092.49
Explanation:
Computation the price of the bond
Using this formula
Price of bond=Par value*1/(1+YTM/2)^(2*time period)
Where,
Par value=$10,000
1/(1+YTM/2)=1/(1+0.043/2)
(2*time period)=(2*21 years)
Let plug in the formula
Price of bond=$10,000*1/(1+0.043/2)^(2*21)
Price of bond=$10,000*1/(1.0215)^42
Price of bond=$10,000*(0.97895252)^42
Price of bond=$10,000*0.4092497467
Price of bond=$4,092.49
Therefore the price of the bond will be $4,092.49
I am buying a firm with an expected perpetual cash flow of $700 but am unsure of its risk. If I think the beta of the firm is 0, when the beta is really 1, how much more will I offer for the firm than it is truly worth? Assume the risk-free rate is 7% and the expected rate of return on the market is 14%. (Input the amount as a positive value.)
Answer:
$50
Explanation:
using the CAPM,
The expected rate of return = risk free rate + beta(market rate of return - risk free rate)
if beta is 0,
7% + 0 X(14% - 7%) = 7%
If beta is 1,
7% + 1 X(14% - 7%) = 14%
Present value of a perpetuity = amount / expected rate of return
if beta is 0, present value = $700 / 7% = $100
if beta is 1, present value = $700 / 14% = $50
the amount offered will differ by $100 - $50 = $50
The Rhaegel Corporation’s common stock has a beta of 1.2. If the risk-free rate is 4.3 percent and the expected return on the market is 13 percent, what is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
Cost of equity = 14.74%
Explanation:
The capital asset pricing model is a risk-based model for estimating the return on a stock..
Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk.
Systematic risks are those which affect all economic actors in the market, they include factors like changes in interest rate, inflation, etc. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM,
E(r)= Rf + β(Rm-Rf)
E(r)- cost of equity , Rf-risk-free rate , β= Beta, Rm= Return on market.
Using this model, we can work out the value of beta as follows:
β-1.2 Rf- 4.3%, Rm = 13%
E(r) = 4.3% + 1.2 × (13 - 4.3)%=14.74 %
Expected return = 14.74 %
Cost of equity = 14.74%
Endor Company begins the year with $110,000 of goods in inventory. At year-end, the amount in inventory has increased to $118,000. Cost of goods sold for the year is $1,300,000. Compute Endor’s inventory turnover and days’ sales in inventory. Assume that there are 365 days in the year
Answer:
11.40
32 days
Explanation:
Inventory turnover and days of sales of inventory are examples of activity ratios.
They are used to measure the efficiency of performing daily tasks
inventory turnover = Cost of goods sold/ average inventory
Average inventory = ($118,000 + $110,000) / 2 = $114,000
Inventory turnover = $1,300,000 / $114,000 = 11.40
days of sales of inventory = 365 / inventory turnover = 365 / 11.40 = 32 days
It costs your company $240 to produce pens and pencils together. To produce the same amount of pens and pencils separately costs $100 for the pens and $120 for the pencils. The production of pens and pencils exhibits:_______
a. diseconomies of scope
b. economies of scope.
c. increasing returns to scale.
d. constant returns to scale.
Answer:
b
Explanation:
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.50. It expects to grow at a constant rate of 2% per year. If investors require a 8% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
The current price of Hubbard's common stock is $25.50.
Explanation:
This can be calculated using the Gordon growth model (GGM) formula that assumes growth is dividend will be constant as follows:
P = D1/(r - g) ............................ (1)
Where,
P = Current stock price = ?
D1 = Next dividend = D0 * (1 + g) = $1.50 * (1 + 2%) = $1.53
r = required return = 8%, or 0.08
g = growth rate = 2%, or 0.02
Substituting the values into equation (1), we have:
P = $1.53 / (0.08 - 0.02) = $25.50
Therefore, the current price of Hubbard's common stock is $25.50.
Organizational learning works best when there is integrated thinking and acting at all levels of the organization, according to Peter Senge.
a) true
b) false
Answer: True
Explanation:
According to Peter Senge, he described team learning as a team skill which is required to be practiced by the team members that are involved so that they will all be able to develop their learning skills collectively.
Organizational learning works best when there is integrated thinking and acting at all levels of the organization.
As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 10 million shares for $58 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $30 million and distributed cash dividends of $3.00 per share. At the end of the year, the fair value of the shares is $54 million.
Required:
Prepare the appropriate journal entries from the purchase through the end of the year.
Answer and Explanation:
The Journal entry is shown below:-
1. Investment in Nursery supplies shares Dr, $58 million
To Cash $58 million
(Being purchase of shares is recorded)
2. Investment in Nursery supplies shares Dr, $9 million
To Investment revenue $9 million ($30 million × 30%)
(Being investment revenue is recorded)
3. Cash Dr, $9 million
To Investment in Nursery supplies shares $9 million
(30% × 10 million × $3.00)
(Being a cash dividend is recorded)
4. No Journal entry is required
Park Co. is considering an investment that requires immediate payment of $28,245 and provides expected cash inflows of $9,300 annually for four years. Assume Park Co. requires a 7% return on its investments.
Required:
a. What is the internal rate of return?
b. Based on its internal rate of return, should Park Co. make the investment?
Answer:
a) Internal rate of return (IRR) = 12.70 %
b) Park Co should make the return because the IRR is higher than the return on investment of 7%. This implies that undertaking the investment would increase the the wealth of the shareholders
Explanation:
The IRR is the discount rate that equates the present value of cash inflows to that of cash outflows. At the IRR, the Net Present Value (NPV) of a project is equal to zero
If the IRR greater than the required rate of return , we accept the project for implementation
If the IRR is less than that the required rate , we reject the project for implementation
IRR = a% + ( NPVa/(NPVa + NPVb)× (b-a)%
NPV = PV of cash inflow - initial cost
PV of cash inflow = A× (1- (1+r)^(-n) )/r
A- cash inflow , r- rate of return, n- number of years
Step 1 :
NPVa at 7%
NPV = (9300 × (1- 1.07^(-4)/0.07 ) - 28,245 = 3,256.06
Step 2:
NPVb at 20%
NPV = (9300 × (1- 1.07^(-4)/0.07 ) - 28,245 = (4,169.77)
Step 3 :
IRR = a% + ( NPVa/(NPVa + NPVb)× (b-a)%
= 7% + (3,256.06 /(3,256.06 + 4,169.77)) × (20-7)%= 12.70
IRR = 12.70%
a) Internal rate of return (IRR) = 12.70 %
b) Park Co should make the return because the IRR (12.70%) is higher than the return on investment of 7%. This implies that undertaking the investment would increase the the wealth of the shareholders
Your parents put $300 into an account paying 11 percent interest for you when you were ten. Ten years later they tell you that you can take the money out of the account. What is the balance to the nearest penny
Answer:
The balance in the account = $851.8
Explanation:
The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years
.
This implies compounding the initial amount invested ($300) at the given interest rate(11%) for 10 years.This will be done as follows:
FV = PV × (1+r)^(n)
FV-Future value
r- rate of return per period
n- Number of period
PV - 300
r-11%
DATA
FV- ?
PV - 300
n- 10
FV= 300 × 1.11^10 = 851.83
The balance in the account = $851.8
Rachel is hosting the neighborhood barbecue party at her house and decides to grill hotdogs. Last year, a package of hotdog buns costed $7 and a package of hotdogs costed $10 and Rachel had bought 15 packages of buns and 15 packages of hotdogs at that time.
Now the price of buns has increased to $8 a package, and the price of hotdogs remained at $10. Rachel decides she will only buy 10 packages of hotdogs this year.
Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.Rachel is hosting the neighborhood barbecue party at her house and decides to grill hotdogs. Last year, a package of hotdog buns costed $7 and a package of hotdogs costed $10 and Rachel had bought 15 packages of buns and 15 packages of hotdogs at that time.
Now the price of buns has increased to $8 a package, and the price of hotdogs remained at $10. Rachel decides she will only buy 10 packages of hotdogs this year.
Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.
Answer: -3, complements
Explanation:
Using the mid-point formula, the cross-price elasticity is 3 and the goods are Complementary Goods.
What is cross-price elasticity?Cross-price elasticity measures how sensitive a product's demand is to a change in a corresponding product price. Some goods in the market can frequently be related to one another. This could imply that an increase or decrease in the price of one product can have an impact on the demand for another. The cross elasticity of demand is an economic concept that measures how responsive one good's demand is when the price of another good changes. This measurement, also known as cross-price elasticity of demand, is calculated by dividing the percentage change in the quantity demanded of one good by the percentage change in the price of the other good. The cross elasticity of demand in economics refers to how sensitive demand for one product is to changes in the price of another.
Companies use the cross elasticity of demand to set prices for their goods. Because there is no cross-elasticity of demand to consider, products with no substitutes can be sold at higher prices. The cross elasticity of demand is used to strategically price complementary goods. Cross elasticity of demand assesses the relationship between two products when one of their prices changes. It depicts the relative change in demand for one product as the price of another increases or decreases.
What are Complementary Goods?A complementary good is a good whose appeal grows in proportion to the popularity of its complement. It has a negative cross elasticity of demand, which means that demand for it rises when the price of another good falls.
When two goods are complementary, they experience joint demand, which means that the demand for one good is linked to the demand for the other. As a result, if a greater quantity of one good is demanded, a greater quantity of the other will be demanded, and vice versa. For example, the demand for razor blades may be affected by the number of razors in use; this is why razors are sometimes sold as loss leaders in order to boost demand for the associated blades. Another example is when a toothbrush is given away free with toothpaste.
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Script, Inc., has two product lines. The September income statements of each product line and the company are as follows: SCRIPT, INC. Product Line and Company Income Statements For Month of September Pens Pencils Total Sales $30,000 $30,000 $60,000 Less variable expenses (12,000) (12,000) (24,000) Contribution margin 18,000 18,000 36,000 Less direct fixed expenses (9,000) (7,000) (16,000) Product margin $9,000 $11,000 20,000 Less common fixed expenses (6,000) Net income $14,000Pens and pencils are sold in two territories, Florida and Alabama, as follows: Florida AlabamaPen sales $18,000 $12,000Pencil sales 9,000 21,000Total sales $27,000 $33,000The common fixed expenses are traceable to each territory as follows:Florida fixed expenses $2,000Alabama fixed expenses 3,000Home office administration fixed expenses 1,000Total common fixed expenses $6,000The direct fixed expenses of pens, $9,000, and of pencils, $7,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.Required:Prepare income statements segmented by territory for September.
Answer:
Script, Inc.
Territory and Company Income Statements
For the Month of September
Florida$ Alabama$ Company Total$
Sales
Pens 18000 12000 30000
Pencils 9000 21000 30000
Total sales [A] 27000 33000 60000
Variable cost
Pens 7200 4,800 12000
[18000*.4] [12000*.4]
[12000 Variable cost / 30000 = 0.40 per pen ]
Pencils 3600 8400 12000
[9000*.4] [21000*.4]
[12000 Variable cost /30000 = 0.4 per pencil]
Total var. cost [B] 10800 13200 24000
Contribution A-B 16200 19800 36000
D. fixed expenses 2000 3000 5000
Territory margin 14200 16800 31000
Common fixed expenses
Pen 9000
Pencil 7000
Home office 1000
Total 17,000 (17000)
Net income 14000
Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Total Company Southern Division Northern Division Sales $ 418,000 $ 193,000 $ 225,000 Variable expenses $ 130,880 $ 79,130 $ 51,750 Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000 Common fixed expense $ 79,420 $ 36,670 $ 42,750 The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions?
Answer:
Neelon Corporation
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Explanation:
a) Data and Calculations:
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Neelon Corporation reaches break-even point when it will make no profit or loss. This implies that its break-even point is reached when sales revenue equals both variable and fixed costs. The excess that Neelon Corporation generates from sales revenue over total costs is regarded as operating income.
In which exchange rate system is the exchange rate determined entirely by the supply of and demand for a currency
Answer: Floating exchange rate system.
Explanation:
Floating exchange rate system is one in which the exchange rate is determined entirely by the supply of and demand for a currency.
In floating exchange rate system, the value of a currency fluctuates based on the happeninge that occur in the foreign exchange market.
Answer:
Managed -> exchange rate determined by both government intervention and supply and demand
Floating -> exchange rate determined by demand and supply of foreign currency
Fixed -> exchange rate pegged to the value of another nation's currency
Explanation:
What is the standard deviation of a portfolio's returns if the mean return is 15%, and the variance of returns is 184
Answer:
Standard deviation =13.6
Explanation:
Standard deviation is measure of the total risks of an investment. It measures the volatility in return of an investment as a result of both systematic and non-systematic risks.
Non-systematic risk includes risk that are unique to a company like poor management, legal suit against the company .
Standard deviation is the sum of the squared deviation of the individual return from the mean return under different scenarios .
Further more, it can be calculated as the square root of the variance of the portfolio.
Standard deviation = √ variance
DATA
Variance = 184
Standard deviation = √184 = 13.6
Standard deviation =13.6
Compromising is most likely the best approach to conflict management when opponents with equal power are committed to mutually exclusive goals.
a. True
b. False
Answer:
true
Explanation:
when two opponents with equal power are committed to mutually exclusive goals then they have to reach a compromise.in a compromise, either of these two parties having a conflict would be willing to give up something to reach an agreement. The needs of both sides would be balanced, as both sides would have to make sacrifices. This makes it a lose-lose approach to conflict resolution for either parties involved. A compromise has to be reached for important goals to be achieved.
Your client in the 25% federal income tax bracket lives in a state where his earnings place him in the 6% bracket for state income tax purposes. If he were to purchase a 4% bond issued by a political subdivision of another state, his total tax-equivalent yield would be
Answer:
Slightly more than 5.33%.
Explanation:
In case when the municipal bond owned by an individual i.e. issued is not for interest free tax rate but also it is non tax on that particular state
So here the tax-equivalent yield is
= Purchase bond percentage ÷ (1 - tax rate)
= 0.04 ÷ (1 - 0.25)
= 5.33%
Hence, his total tax-equivalent yield is 5.33% i.e. calculated by applying the above formula
A beta of 0.5 for a security indicates Group of answer choices the security has no market risk. the security has above average market risk. the security has above average company-unique risk. the security has below average company-unique risk. the security has below average market risk.
Answer:
the security has below average market risk.
Explanation:
As we know that the beta is the systematic risk i.e. market risk of the stock.
if we assume that the average risk in the market is 1 so the beta of the market or market beta is the average risk
Now if the beta of the stock is less than 1 i.e. 0.5 so it is below the average risk of the market
Hence, the correct option is d.
Harvey’s Hardware is thinking about starting a line of lawnmowers to serve its customer base in the summer. The lawnmowers would be priced at $100 and Harvey the manager believes that they would sell 3 units. They have the following estimated costs.
Units Produced Labor Cost Total cost
0 0 100
1 50 150
2 100 200
3 200 300
4 350 450
What is the marginal cost of producing the third unit?
a. $400
b. $300
c. $200
d. $100
Answer:
Harvey's Hardware
Marginal cost of producing the third lawnmowers:
d. $100
Explanation:
Harvey's marginal cost for producing the third unit of lawnmowers is the additional cost that resulted when the total cost increased from $200 to $300. However, it can be deciphered from the case that the marginal cost for Harvey, which it is supposed to be a variable cost, is traceable to the direct labor costs. This implies that the fixed cost element for Harvey in the production of the lawnmowers has been relatively fixed at $100. It does not vary with the volume of production, while the direct labor costs vary with the volume of lawnmowers produced by Harvey.
Members of the board of directors of have received the following operating income data for the year just ended:
Safety Step Income Statement For the Year Ended May 31, 2018,
Product Line
Industrial Household
Systems Systems Total
Net Sales Revenue $310,000 $330,000 640,000
Cost of Goods Sold
Variable 33,000 48,000 81,000
Fixed 230,000 68,000 298,000
Total Cost of Goods Sold 263,000 116,000 379,000
Gross Profit 47,000 214,000 261,000
Selling and Administrative Expenses
Variable 68,000 72,000 140,000
Fixed 43,000 28,000 71,000
Total Selling and Administrative Expenses 111,000 100,000 211,000
Operating Income (Loss) $(64,000) $114,000 $50,000
Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should discontinue the line. Company accountants estimate that dropping industrial systems will decrease the fixed cost of goods sold by $82,000 and decrease fixed selling and administrative expenses by $15,000.
Required:
a. Prepare a differential analysis to show whether Safety Step should drop the industrial systems product line.
b. Prepare contribution margin income statements to show Safety Step's total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the two alternatives' income numbers to your answer to Requirement 1.
c. What have you learned from the comparison in Requirement 2?
Answer:
a) with industrial without industrial differential
systems systems amount
sales revenue 640,000 330,000 (310,000)
variable COGS (81,000) (48,000) 33,000
fixed COGS (298,000) (216,000) 82,000
gross profit 261,000 66,000 (195,000)
variable S&A (140,000) (72,000) 68,000
fixed S&A (71,000) (56,000) 15,000
operating 50,000 (62,000) (112,000)
income
b) contribution margin income statements:
with industrial systems
Sales revenue $640,000
- Variable COGS ($81,000)
- Variable S&A ($140,000)
Contribution margin $419,000
- Fixed COGS ($298,000)
- Fixed S&A ($71,000)
Operating income $50,000
without industrial systems
Sales revenue $330,000
- Variable COGS ($48,000)
- Variable S&A ($72,000)
Contribution margin $210,000
- Fixed COGS ($216,000)
- Fixed S&A ($56,000)
Operating loss ($62,000)
c) sometimes certain product lines help to amortize fixed costs and even though they are not profitable by themselves, without them, the company's operating profits and net income could be negatively affected.
Presented below are the ending balances of accounts for the Kansas Instruments Corporation at December 31, 2021.Account Title Debits CreditsCash $40,000 Accounts receivable 170,000 Raw materials 44,000 Notes receivable 120,000 Interest receivable 23,000 Interest payable $25,000 Investment in debt securities 52,000 Land 70,000 Buildings 1,700,000 Accumulated depreciation—buildings 640,000 Work in process 62,000 Finished goods 109,000 Equipment 340,000 Accumulated depreciation—equipment 150,000 Patent (net) 140,000 Prepaid rent (for the next two years) 80,000 Deferred revenue 56,000 Accounts payable 200,000 Notes payable 600,000 Restricted cash 100,000 Allowance for uncollectible accounts 33,000 Sales revenue 1,200,000 Cost of goods sold 470,000 Rent expense 48,000 Additional Information:1. The notes receivable, along with any accrued interest, are due on November 22, 2022.2. The notes payable are due in 2025. Interest is payable annually.3. The investment in debt securities consist of treasury bills, all of which mature next year.4. Deferred revenue will be recognized as revenue equally over the next two years.Required:Determine the company’s working capital (current assets minus current liabilities) at December 31, 2021.
Answer:
Working capital = $ 374,000
Explanation:
Calculation to Determine the company’s working capital at December 31, 2021
Formula for Working Capital
Working capital = Current assets - Current liabilities
First is to find the Current assets
Current assets =Cash $40,000 + Accounts receivable 170,000 +Raw materials 44,000+Work in process 62,000 +Finished goods 109,000 +Notes receivable 120,000 +Interest receivable 23,000 +Investment in debt securities 52,000+Prepaid rent 40,000 (80,000/2)
Current assets=$660,000
Second step is to find the Current liabilities
Current liabilities =Interest payable $25,000+Accounts payable 200,000+Deferred revenue 28,000 (56,000/2) +Allowance for uncollectible accounts 33,000
Current liabilities =$286,000
Let plug in the formula
Working capital =$660,000 - $286,000
Working capital = $ 374,000
Therefore the company’s working capital at December 31, 2021 will be $374,000
Identify whether each of the following items would appear on the bank side or the book side of a bank reconciliation. Outstanding checks Answer 1 Choose... Deposits in transit Answer 2 Choose... Bank service charges Answer 3 Choose... NSF Check
Answer:
Outstanding checks - Book side
Deposits in transit - Book side
Bank service charges - Bank side
NSF Check - Book side
Explanation:
The bank reconciliation helps identify the transactions that have been recorded in the cash book but omitted from the bank statement and vice versa.
Considering the given items
Outstanding checks - These are checks that have been written and deducted from the cash balance in the book but yet to be recognized or cleared in the bank statement.
Deposits in transit - The amount would appear on the book side as it represents amounts that have been collected but yet to be deposited and subsequently recognized in the bank statement.
Bank service charges - These are charges that have been recognized in the bank but yet to be recorded or deducted from the cash balance in the books.
NSF Check - This represents customer's debt settlement via check that has not been honoured by the bank. Hence this will have to be deducted from the cash balance in the books