Answer:
Cash generated by operating activities is $517,200.
Explanation:
Cash flows from operating activities
Net Income $470,000
Adjustments to reconcile net income to operating cash flow
Add: Depreciation Expense $87,000
Less: Gain on Sale of Machinery $-23,000 $64,000
Change in Operating Assets and Liabilities
Accounts receivable increase $-40,400
Prepaid expenses decrease $16,500
Accounts payable increase $10,000
Wages payable decrease $-2,900 $-16,800
Cash generated by operating activities $517,200
A financial advisor informs a client that the expected return on a portfolio is 8% with a standard deviation of 12%. There is a 25% chance the return will be negative and a 15% chance that the return would be above 16%. Does her assessment follow a normal distribution? Calculate the probabilities for a normal distribution and compare.
Answer:
A) The assessment does not follow a normal distribution
B ) P(r<0) = 0.2546 ( from standard normal table ), P( r > 0.16 ) ≠ 0.15
Explanation:
Expected return on portfolio E (r) = 8%
Standard deviation (STD) = 12%
chances of Negative return P(r < 0 ) = 25%
calculate the probabilities for a normal distribution
E (r) = 0.08 , STD = 0.12, P(r < 0 ) = 0.25
P( r > 0.16 ) = 0.15
calculating the value of the probability P(r < 0 )
P(r < 0 ) = P [tex](Z < \frac{0-E(r)}{STD} )[/tex]
= P ( Z < [tex]\frac{0-0.08}{0.12}[/tex] )
= P ( Z < - 0.667 )
P(r<0) = 0.2546 ( from standard normal table )
calculating the value of the probability P( r > 0.16 )
P( r > 0.16 ) = [tex]P ( Z > \frac{0.16- E(r)}{STD})[/tex]
= P ( Z > [tex]\frac{0.16-0.08}{0.12}[/tex] )
= P ( Z > 0.667 )
to compare if p(r>0.16 ) is = 0.15
P(R > 0.16 ) = 1 - P ( Z < 0.667 )
= 1 - 0.7454 ( value from standard normal table )
= 0.2546
hence P( r > 0.16 ) ≠ 0.15
The assessment does not follow a normal distribution
Normally, the buyer's offer in a commercial transaction takes the form of:____________.
1. a phone call with the parties directly speaking with each other.
2. a personal letter.
3. a purchase order.
4. an acknowledgment form.
Answer:
3. a purchase order.
Explanation:
Normally, the buyer's offer in a commercial transaction takes the form of a purchase order. Commercial transaction refers to the law guiding, regulating or governing business transactions and deals.
A purchase order can be defined as an official document which a buyer send to sellers of goods and services in order to document and have a record of the sale of products and services to be delivered to the buyer at a later date. It allows making order without paying immediately.
According to the two-factor theory, ________. A) there exists a hierarchy of needs within every human being, and as each need is satisfied, the next one becomes dominant B) most employees inherently dislike work and must therefore be directed or even coerced into performing it C) employees view work as being as natural as rest or play, and therefore learn to accept, and even seek, responsibility D) the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction E) achievement, power, and affiliation are three important needs that help explain motivatio
Answer: D. ) the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction
Explanation:
According to the two-factor theory, it is stated that some factors in an organization or company results in job satisfaction while another group of factors results in dissatisfaction of the workers and that both of these factors doesn't depend on one another.
Therefore, the two factor theory the aspects that lead to job satisfaction are separate and distinct from those that lead to job dissatisfaction.
Option d is the right answer.
The price of a stock at the end of each of the past three years has been $14, $12, and $11 with $11 being the latest price. The stock pays an annual dividend of $1 per share. What is the average annual capital gain for the past two years
Answer: 11.31%
Explanation:
From the question, we are informed that the price of a stock at the end of each of the past three years has been $14, $12, and $11 with $11 being the latest price and that the stock pays an annual dividend of $1 per share.
The average annual capital gain for the past two years will be:
= (-$2/$14) + ($-1/$12)/2
= 11.31%
What is the required monthly payment on a $350,000 mortgage? Assume a standard mortgage (360 months) with monthly payments. Use a nominal rate of 6.90%.
Answer:
EMI = $2,305
Explanation:
We can calculate Monthly payment on a $350,000 mortgage by using following formula of equated monthly installments. You just need to collect the data to input in the formula for further calculation.
Data
Principal amount = $350,000
Rate = 6.90% = 6.90%/12months = 0.00575
number pf periods = 360 months
Formula
EMI = [[tex]\frac{[P x R x (1+R)^{n} }{(1+R)^{n-1} }[/tex]]
P = Principal amount
R = Rate
n = number pf periods
Solution
EMI =[tex]\frac{[350,000 x0.00575 x ((1+0.00575)^{360-1}) ]}{1+0.00575)^{360-1}}[/tex]
EMI = $2,305
Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with an allowance for sales returns of $400,000. During 2018, Halifax sold merchandise on account for $12,500,000. This merchandise cost Halifax $8,750,000 (70% of selling prices). Also during the year, customers returned $613,000 in sales for credit. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance. 2. What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded?
Answer:
Please refer to the below explanations.
Explanation:
A.
Sales return and allowance a/c Dr $613,000
To accounts receivable A/c Cr $613,000
(Being retuned goods that is recorded)
Merchandise inventory A/c Dr $429,100
($613,000 × 70%)
To cost of goods sold A/c Cr $429,100
(Being cost of goods sold that was recorded)
Estimated return is therefore;
= Sale value of merchandise × return percentage - actual return
= $12,500,000 × 5% - $613,000
= $625,000 - $613,000
= $12,000
B.
Sales return and allowance A/c Dr $12,000
To accounts receivable A/c Cr $12,000
(Being returned goods that were recorded)
Merchandise inventory A/c Dr $8,400
($12,000 × 70%)
To cost of goods sold A/c Cr $8,400
(Being cost of goods sold that were recorded)
Therefore, the computation for the year end allowance for sales return is same as $8,400.
Merry Maidens Cleaning generally charges $280 for a detailed cleaning of a normal-size home. However, to generate additional business, Merry Maidens is offering a new-customer discount of 10%. On May 1, Ms. E. Pearson has Merry Maidens clean her house and pays cash equal to the discounted price. Required: Record the revenue earned by Merry Maidens Cleaning on May 1.
Answer:
May 1
DR Cash $252
CR Service Revenue $252
(To record payment for services rendered)
Working
Cash = Net Service revenue
Net Service revenue = $280 * ( 1 - 10%)
= 280 * 90%
= $252
A company's board of directors votes to declare a cash dividend of $1.20 per share of common stock. The company has 24,000 shares authorized, 19,000 issued, and 18,500 shares outstanding. The total amount of the cash dividend is:
Answer:
$22,200
Explanation:
Shares is a method through which firms raise capital.
Authorised shares are the maximum number of shares a company can issue to investors
Outstanding shares are the total number of shares sold to investors . It is only outstanding shares that receive dividend payment.
Issued shares are the shares that a company issues
cash dividend = $1.20 x 18,500 = $22,200
Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain this dividend for the next 3 years and will then cease paying dividends forever. What is the current price per share if the required return on this stock is 15.6 percent
Answer:
$9.04
Explanation:
Calculation for the current price per share
Using this formula
P0 = Annual dividend[1 − (1/1+Required return)]/ Required return
Let plug in the formula
P0=$4[(1- (1/1+0.156)]/.156
P0 = $4[1 − (1/1.1563)]/.156
P0 = $9.04
Therefore the current price per share will be $9.04
Various financial data for SunPath Manufacturing for 2015 and 2016 follow. 2015 2016 Output: Sales $ 300,000 $ 330,000 Inputs: Labor $ 40,000 $ 43,000 Raw Materials: $ 45,000 $ 51,000 Energy: $ 10,000 $ 9,000 Capital Employed: $ 250,000 $ 262,000 Other: $ 2,000 $ 6,000 What is the percentage change in the multifactor labor and raw materials productivity measure for SunPath between 2015 and 2016
Answer:
% change in multi-factor productivity = 2.88%
% change in raw materials productivity = -2.94%
% change in labor productivity = 2.33%
Explanation:
2015 2016
Output:
Sales $300,000 $330,000Inputs:
Labor $40,000 $43,000 Raw Materials: $45,000 $51,000 Energy: $10,000 $9,000 Capital Employed: $250,000 $262,000 Other: $2,000 $6,000multi-factor = total output / (labor costs + materials costs + overhead costs)
MFP 2015 = $300,000 / ($40,000 + $45,000 + $10,000 + $250,000 + $2,000) = 0.8646
MFP 2016 = $330,000 / ($43,000 + $51,000 + $9,000 + $262,000 + $6,000) = 0.8895
% change = (0.8895 - 0.8646) / 0.8646 = 0.0288 = 2.88%
raw materials productivity = total output / materials costs
raw materials productivity 2015 = $300,000 / $45,000 = 6.6667
raw materials productivity 2016 = $330,000 / $51,000 = 6.4706
% change = (6.4706 - 6.6667) / 6.6667 = -0.0294 = -2.94%
labor productivity = total output / labor costs
labor productivity 2015 = $300,000 / $40,000 = 7.5
labor productivity 2016 = $330,000 / $43,000 = 7.6744
% change = (7.6744 - 7.5) / 7.5 = 0.0233 = 2.33%
Weller Company's budgeted unit sales for the upcoming fiscal year are provided below: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted unit sales 34,000 36,000 27,000 32,000 The company’s variable selling and administrative expense per unit is $3.30. Fixed selling and administrative expenses include advertising expenses of $11,000 per quarter, executive salaries of $53,000 per quarter, and depreciation of $33,000 per quarter. In addition, the company will make insurance payments of $4,000 in the first quarter and $4,000 in the third quarter. Finally, property taxes of $7,200 will be paid in the second quarter. Required: Prepare the company’s selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)
Answer and Explanation:
The preparation of company’s selling and administrative expense budget for the upcoming fiscal year is shown below:-
Weller Company
Selling and Administrative Expense Budget
Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Unit
Sales a 34,000 36,000 27,000 32,000 129,000
Variable Selling and Administrative Expense
Per Unit $3.3 $3.3 $3.3 $3.3 $3.3
Variable Selling and Administrative
Expense (a × b) $112,200 $118,800 $89,100 $105,600 $425,700
Fixed Selling and Administrative Expense
Advertising $11,000 $11,000 $11,000 $11,000 $44,000
Executive
Salaries $53,000 $53,000 $53,000 $53,000 $212,000
Insurance $4,000 0 $4,000 0 $8,000
Property Taxes 0 $7,200 0 0 $7,200
Depreciation $33,000 $33,000 $33,000 $33,000 $132,000
Total Fixed Selling and Administrative
Expense $101,000 $104,200 $101,000 $97,000 $403,200
Total Selling and Administrative
Expense $213,200 $223,000 $190,100 $202,600 $828,900
Less:
Depreciation $33,000 $33,000 $33,000 $33,000 $132,000
Cash Paid for Selling and
Administrative
Expenses $180,200 $190,000 $157,100 $169,600 $696,900
Choose some specific types of changes you would like to see happen in groups or organizations with which you are familiar. Imagine that you were to try to bring about these changes. What sources of resistance should you anticipate? How would you manage the resistance?
Answer:
Explanation:
Human are the source of resistance this include the staff, employees, employers and the team of the organization that is involved.
The resistance often come because of the fear of the outcome of the innovation or change and complacency with the current state.
Ability to Capture the passion needed and leverage on the position surrounding the change can reduces resistance among the people
Ability to get support of management, supervisors to advocate for the change helps reduce resistance.
Also, the reason for the change and its impact should be well communicated among the employees this help reduce resistance.
Johnson & Coleman has created a new line of premium quality writing desks. The company marketed the product by highlighting its durability and functionality. According to the VALS™ framework, to which of the following psychographic groups would the writing desk appeal the most?A. AchieversB. StriversC. ExperiencersD. Thinkers
Answer:
I believe the answer is d
Explanation:
[The following information applies to the questions displayed below.] On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $318,000. The machine is expected to last five years and have a salvage value of $59,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the double-declining-balance method. (Enter all amounts positive values.)
Answer:
2016= Annual depreciation= $77,700
2017= Annual depreciation= $75,620
Explanation:
Giving the following information:
Purchase price= $318,000.
Useful life= 5 years
Salvage value= $59,000
To calculate the depreciation expense, we need to use the following formula:
Annual depreciation= 2*[(book value)/estimated life (years)]
Annual depreciation= 2*[(318,000 - 59,000)/5]= 103,600
2016:
Annual depreciation= (103,600/12)*9= 77,700
2017:
Annual depreciation= [(259,000 - 77,700)/5]*2= 75,620
Smathers Corp. stock has a beta of 1.23. The market risk premium is 7.00 percent and the risk-free rate is 2.86 percent annually. What is the company's cost of equity?
Answer:
the company's cost of equity is 11.47 %.
Explanation:
The Company`s cost of equity is the return that is required by holders of Common Stocks.
The Cost can be determined using the Capital Asset Pricing Model (CAPM) as follows :
Cost of Equity = Return on Risk Free Rate + Beta × Return on Market Portfolio
= 2.86 % + 1.23 × 7.00 %
= 11.47 %.
g Call options on IBM-listed stock options are Group of answer choices created by investors and traded on various exchanges. issued by IBM Corporation. traded on various exchanges. issued by IBM Corporation and traded on various exchanges. created by investors.
Answer: Created by investors and traded on various exchanges
Explanation:
Call options are contracts that give the buyer the right to buy the underlying assets of the option on a particular date at a set price by exercising the option. American Call options can be exercised anytime before the date listed in the contract as well.
Call options are created by people who already own stock in the company i.e investors in IBM and traded on various exchanges such as the Chicago Board Options Exchange. It acts as a supplementary way to make income from stock if the investors do not believe that the stock price will go up thus enabling them to make income from the contract price.
Your teammates, Sara and Juan, are having difficulty cooperating with one another even though their individual assignments are highly related. Which of the following actions is least likely to improve their cooperation?
1) Ask them to make suggestions to each another about ways to possibly improve each person’s assignment.
2) Have them work on their own and only meet with the rest of the team when absolutely necessary.
3) As a team, discuss how each member’s contributions are linked and contribute to the team’s goals.
4) Re-assign their tasks so that they are working on very different aspects of the team’s project.
Answer: Have them work on their own and only meet with the rest of the team when absolutely necessary.
Explanation:
From the question, we are informed that Sara and Juan, are having difficulty cooperating with one another even though their individual assignments are highly related.
To improve their cooperation, the best thing to do is to have them work on their own and only meet with the rest of the team when absolutely necessary.
Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $175, 846, net annual cash flows $37, 300, and present value factor of cash inflows for 10 years 5.02 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
Determine the net present value, and indicate whether the investment should be made?
Answer:
NPV = $11400
As the NPV from the project is positive, the investment should be made.
Explanation:
The NPV or net present value is an important metric that is used for project and investment evaluation. The NPV is the present value of the series of cash flows provided by the project less the initial cost incurred to undertake the project. NPV can be calculated as follows,
NPV = (Annual Cash Flow * Present value factor) - Initial cost
NPV = (37300 * 5.02) - 175846
NPV = $11400
As the NPV from the project is positive, the investment should be made.
Debt financing has one important advantage that the early Modigliani and Miller (MM) propositions ignored: the interest on business debt is tax deductible. This benefit means that the amount of taxes that a business is required to
pay will be reduced by a phenomenon called an interest tax shield, which is a function of the amount of debt in the firm's capital structure and its tax rate. In contrast, the dividends that a corporation pays on its common and
preferred shares are not tax deductible.
Consider the case of Green Llama Foodstuffs, Inc.:
At the beginning of the year, Blue Chipmunk Foodstuffs, Inc. had an unlevered value of $8,500,000. It pays federal and state taxes at the marginal rate of 40%, and currently has $2,500,000 in debt capital in its capital structure.
According to MM Proposition I with taxes, Green Llama Foodstuffs is allowed to recognize a tax shield of ___________, and the levered value of the firm is:
a. $7,100,000
b. $12,500,000
c. $9,900,000
d. $4,500,000
Answer:
c. $9,500,000
Explanation:
Un-levered value = $8,500,000
Tax= 40% = 0.4
Debt capital= $2,500,000
Tax shield = Debt capital * Tax
Tax shield = $2,500,000 * 0.4
Tax shield = $1,000,000
Levered value = Unlevered value + Tax shield
Levered value = $8,500,000 + $1,000,000
Levered value = $9,500,000
Gen-Fast Shoes wants to expand internationally and is deciding if its line of tennis shoes can be sold at a high price in Europe. One way for Gen-Fast Shoes to assess this is to determine whether these types of shoes in the foreign market offer customers greater.
a. cost.
b. exports.
c. value.
d. competition.
e. production.
Answer: value
Explanation:
From the question, we are informed that Gen-Fast Shoes wants to expand internationally and is deciding if its line of tennis shoes can be sold at a high price in Europe.
One way for Gen-Fast Shoes to assess this is to determine whether these types of shoes in the foreign market offer customers greater value.
Value simply means the worth of something. When people realize that the tennis shoes are worth it, it'll command a high value.
Wertz Corporation issued ten-year, 8% bonds on January 1, 2017 at a discount. During 2017, the company's accountant failed to amortize any of the bond discount. The omission of the discount amortization will
Answer:
Wertz Corporation
Omission of the discount amortization will:
increase the net income by the amount of the discount that should have been amortized in the year ended December 31, 2017.
Explanation:
Wertz's bond discount represents a loss to the corporation that should be written off over the life of the bond. If the 2017 discount amortization is omitted, the net income is increased by the amount of the discount amortization expense. This means that the income is overstated by that amount. If this omission is discovered before the issuance of the financial reports, it should be reflected in the accounts. If not, depending on its materiality, this amount must be reflected by restating the 2017 financial statements.
Current cost to source from the home plant to Country A is $0.55 per unit, plus $0.02 in shipping (there is no tariff). If product is sourced from Country B, manufacturing cost is expected to be 20% lower; but shipping will increase to $0.06, and there is a tariff of 15% on CIF. What will the savings be on 100 million units if sourcing for Country A switches from the home plant to Country B
Answer:
Cost savings in sourcing from Country A = $0.5 million ($57.5 - $57 million)
Explanation:
Sourcing from Country A:
Purchase price = $0.55 per unit
Shipping = $0.02
Total Cost = $0.57
Cost of 100 million units = $57 million
Sourcing from Country B:
Purchasing price = $0.44 ($0.55 x 80%)
Shipping = $0.06
CIF Tariff = 15% = $0.075 ($0.5 x 15%)
Total Cost = $0.575
Cost of 100 million units = $57.5 million
Sourcing from Country A is more beneficial than sourcing from Country B with reduced product cost, but increased shipping and additional tariff. Whereas Country A gives a total cost for 100 million units of $57 million, sourcing the same units from Country B gives a total cost of $57.5 million. The savings of $0.5 million is substantial that no company would like to lose unless the goods from Country B are of higher quality than those from Country A.
Net sales for the year were $1,050,000 and cost of goods sold was $735,000 for the company’s existing products. A new product is presently under development and will have an expected selling price of not more than $68 per unit in order to remain competitive with similar products in the marketplace. Required: a. Calculate gross profit and the gross profit ratio for the year.
Answer:
The answer is:
Gross profit is $315,000
Gross profit ratio is 30 percent
Explanation:
Gross profit equals net sales minus cost of sales
Net sales - $1,050,000
Cost of sales - ($735,000)
Gross profit -. $315,000
Gross profit ratio is:
(Gross profit / net sales) x 100 percent
($315,000 / $1,050,000) x 100 percent
0.3 x 100 percent
30 percent.
So we have:
Gross profit is $315,000
Gross profit ratio is 30 percent
every organization has a set of unwritten norms that mambers of the organization accept and understand and which guide their actions. this system of shared meaning is
Answer:
Organization's culture.
Explanation:
Every organization has a set of unwritten norms that members of the organization accept and understand and which guide their actions. This system of shared meaning is organization's culture.
An organizational culture typically comprises of values, norms, beliefs and assumptions which defines the most appropriate ways of behaving in an organization (work environment).
Generally, an organizational culture is usually designed and established by the top executives or management of an organization and communicated to the various employees working there.
According to Robert Quinn and Kim Cameron, an organizational culture can be divided into four (4) main categories;
1. Adhocracy culture.
2. Clan culture.
3. Hierarchy culture.
4. Market culture.
Additionally, the significance of an organizational culture is simply that it creates a unique social, efficient and psychological environment of an organization.
Radoski Corporation's bonds make an annual coupon interest payment of 7.35% every year. The bonds have a par value of $1,000, a current price of $1,470, and mature in 12 years. What is the yield to maturity on these bonds
Answer:
The answer is 2.71 percent
Explanation:
The interest payment is annually.
N(Number of periods) = 12 years
I/Y(Yield to maturity) = ?
PV(present value or market price) = $1,470
PMT( coupon payment) = $73.5 ( [7.35 percent x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 12; PV = -1470 ; PMT = 73.5; FV= $1,000; CPT I/Y= 2.71
Therefore, the Yield-to-maturity of the bond annually is 2.71 percent
Amos Manufacturing has two major departments. Management wants to compare their relative performance. Information related to the two departments is as follows:Division 1:Sales: $200,000Expenses: $150,000Asset investment: $950,000Division 2:Sales: $45,000Expenses: $35,000Asset investment: $200,000Based on ROI, which division is more profitable?a. Division 1b. Both divisions have the same ROI ratioc. Division 2
Answer:
Division A is doing better and his more profitable because it has a higher ROI than Division B
Explanation:
Return on Investment is the proportion of operating assets that an investment center earned as as net operating income.
ROI is measure of the returned earned by a division relative to the amount invested in the assets used to generate the return.
It is calculated as follows
ROI = operating income/operating assets
Division A
Net operating income = Sales - expenses
Net operating income = 200,000 - 150,000 = 50,000
Operating assets = 950,000
ROI = 50,000/950,000× 100 = 5.26 %
Division B
Net operating income = 45,000 - 35,000 = 10,000
Operating assets = 200,000
ROI = 10,000/ 200,000 × 100 = 5 %
Division A is doing better and his more profitable because it has a higher ROI than Division B
Entity A supplies planed timber, paint, varnish, springs, upholstery, and cushioning to Entity B, which produces a ready to use furniture. Entity C is the marketing department of Entity B. In this context, ______.
Answer:
A is an upstream supply chain member while C is the downstream chain member
Explanation:
There are two portions of the supply i.e downstream and upstream. In the upstream it reflects the suppliers of the organization and its process for managing the relation
While on the other hand the downstream reflects the process for distribution and delivery of products to the customers T
Therefore in the given case, Entity A is upstream while the Entity C is downstream
A customer redeems 1,000 shares of ABC Fund on Wednesday, June 14th. Under the provisions of the Investment Company Act of 1940, the customer must be paid the money no later than:
Answer:
Wednesday, June 21st
Explanation:
In this scenario, since the customer redeemed the shares on Wednesday, June 14th then he must be paid before Wednesday, June 21st. This is 7 days after the redemption. According to section 22 article (e) of the Investment Company Act of 1940, all companies are prevented from postponing the date of payment for more than seven days as stated below.
(e) No registered investment company shall suspend the right
of redemption, or postpone the date of payment or satisfaction upon
redemption of any redeemable security in accordance with its terms
for more than seven days after the tender of such security to the
company or its agent designated for that purpose for redemption
Demand characteristics can threaten internal validity because the results ____ can be explained by reactivity instead of the treatment conditions correlate with those that threaten external validity may be specific to the experimenter who has the expectations may not generalize to situations where demand characteristics are different
Answer: can be explained by reactivity instead of the treatment conditions
Explanation:
Internal validity is the degree of confidence that a researcher has when he or she believes that the causal relationship that is not being influenced by other variables and therefore trustworthy.
Demand characteristics can threaten internal validity because the results can be explained by reactivity instead of the treatment conditions.
The Bathtub Division of Kirk Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,000 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $160. If sold externally, the estimated variable cost per unit would be $140. However, by selling internally, the Faucet Division would save $6 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $43 per unit and has variable costs of $25.
Required:
Compute the minimum transfer price that the Faucet Division should be willing to accept, and discuss whether it should accept this offer.
Answer:
Minimum transfer price = $152
Explanation:
The minimum transfer price can be calculated by Adding variable cost and the contribution margin lost
Minimum transfer price = Variable cost + Contribution margin lost
Minimum transfer price = $134 + $18
Minimum transfer price = $152
Working
Variable cost = $140 -$6(saving) = $134
Contribution margin lost = Selling price - variable cost per unit
Contribution margin lost = $43 - $25
Contribution margin lost = $18
Decision: The offer should be accepted because the minimum transfer price of $152 is less than $160