Answer:
a.
Date Account Title Debit Credit
XX-XX-XXXX Raw materials inventory $90,000
Accounts Payable $90,000
b.
Date Account Title Debit Credit
XX-XX-XXXX Work in Process Inventory $64,000
Raw materials inventory $64,000
c.
Date Account Title Debit Credit
XX-XX-XXXX Work in Process inventory $30,000
Wages Payable $30,000
d.
Date Account Title Debit Credit
XX-XX-XXXX Work in Process Inventory $20,000
Manufacturing overhead $20,000
Ortega Company manufactures computer hard drives. The market for hard drives is very competitive. The current market price for a computer hard drive is $54. Ortega would like a profit of $14 per drive. What target cost Ortega should set to accomplish this objective
Answer:
$40
Explanation:
Target cost is the cost per unit arrived at after having deducted the required profit margin from the competitive market price.
It is a management technique that makes management think about ways to achieve a set target cost rather than forcing their actual cost plus profit margin on customers.
In this case, the competitive market price is $54 per unit of hard drive whereas the company expects to achieve a total profit of $14 per unit
Profit margin per unit=$14
competitive market price=$54
Target cost=competitive market price-profit margin per unit
Target cost=$54-$14
Target cost=$40
This year, Sigma Inc. generated $639,000 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months:
Initial Basis Acc. Depr Sale Price
Marketable securities $144,000 0 $64,000
Production equipment 93,000 $76,000 30,000
Business realty:
Land 165,000 0 180,000
Building 200,000 58,300 210,000
Required:
a. Compute Sigma’s taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured.
b. Recompute taxable income assuming that Sigma sold the securities for $150,000 rather than $64,000.
Answer:
Sigma Inc.
a. Sigma's Taxable Income:
Business income = $639,000
Capital gains = 16,300
Total taxable income $655,300
b. Sigma's Taxable Income:
Business income = $639,000
Capital gains = 102,300
Total taxable income $741,300
Explanation:
a) Data and Calculations:
Business income = $639,000
Capital gains:
Initial Basis Acc. Depr Sale Price Gain/(Loss)
Marketable securities $144,000 0 $64,000 ($80,000)
Production equipment 93,000 $76,000 30,000 13,000
Business realty:
Land 165,000 0 180,000 15,000
Building 200,000 58,300 210,000 68,300
Net capital gains $16,300
Capital gains recomputed:
Initial Basis Acc. Depr Sale Price Gain/(Loss)
Marketable securities $144,000 0 $150,000 $6,000
Production equipment 93,000 $76,000 30,000 13,000
Business realty:
Land 165,000 0 180,000 15,000
Building 200,000 58,300 210,000 68,300
Net capital gains $102,300
Exercise 9-15A (Static) Using the current ratio to make comparisons LO 9-7 The following information was drawn from the balance sheets of the Kansas and Montana companies: Kansas Montana Current assets $ 59,000 $ 78,000 Current liabilities 40,000 43,000 Required a. Compute the current ratio for each company. b. Which company has the greater likelihood of being able to pay its bills
Answer:
a. 1.5 and 1.8
b. Montana
Explanation:
Below is the calculation for the current ratio:
a. Formula used, Current ratio = Current assets / Current liabilities
Current ratio of Kansas = 59000 / 40000 = 1.5
Current ratio of Montana = 78000 / 43000 = 1.8
b. The company that has a higher current ratio will have a greater likelihood to pay bills so Montana is the correct answer.
In a newsvendor model where the demand has normal distribution, if Co < Cu, i.e., the overage cost is lower than the underage cost, then the optimal ordering quantity (i.e., the Newsvendor ordering quantity) will be:_______.
Answer:
maximum
Explanation:
The newsvendor model may be defined as the mathematical model which is characterize by the fixed prices as well as the uncertain demand for the perishable products. This model is mainly used to determine the optimal inventory level.
According to the newsvendor model, there is only one opportunity to order. The cost of buying large quantities of the products may result in disposing them or selling the products at a lower price.
The optimal ordering quantity is maximum when the underage cost is higher than the overage cost.
Year Nominal GDP Real GDP GDP Deflator (Dollars) (Base year 2016, dollars) 2016 2017 2018 From 2017 to 2018, nominal GDP , and real GDP. The inflation rate in 2018 was.
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
Answer:
Explanation:
The Real GDP is defined as the Nominal GDP minus the inflation effect.
Real GDP provides a more accurate picture of economic growth than nominal GDP because it uses constant prices, making comparisons between years more meaningful by allowing for comparisons of the actual volume of goods and services without considering inflation.
Let's say you bought apples at 5dollars per pound in 2015. Imagining a country of 1000 people and considering everyone bought a pound apples and only apples in that year, the GDP comes out to be 1000*5 = 5000 dollars.
Now let's say inflation rate is 10 percent in 2016 which will increase the price to 5.5 dollars per pound. Also, in one year, 10 more people were added to the country (No of births - No of deaths = New people in that year), this brings out total population to around 1010.
Also, let's say that the sale of apples remained the same, so the GDP of 2016 comes out to be 1000*5.5 = 5500 dollars.
That's a whooping 10% increase in GDP, right?
But here the catch.
The GDP increased not because the demand increased, but because the price of the good increased.
If we see at previous year's price (Not considering the inflation, also called Real GDP), the GDP is same which is 5000 dollars.
So, in reality, there isn't any increase in GDP.
On December 31, 2020, Marin Company borrowed $67,653 from Paris Bank, signing a 5-year, $114,000 zero-interest-bearing note. The note was issued to yield 11% interest. Unfortunately, during 2022, Marin began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would receive back only $85,500 at maturity. The market rate of interest on loans of this nature is now 12%.
Prepare the entry, if any, to record the impairment of the loan on December 31, 2022, by Paris Bank.
Answer:
Journal Entries
December 31, 2020
Dr. Note Receivables $114,000
Cr. Discount on bond $46,347
Cr. Cash $67,653
December 31, 2020
Dr. Impairment loss $20,839
Cr. Allowance for Impairment $20,839
Explanation:
Calculate the discount on the bond as follow
Discount on the bond = Face value of Note - Borrowed Amount = $114,000 - $67,653 = $46,347
On December 31, 2020 calculate the present value of face value of note and recoverable value
Present value of Note = Face value x Discount factor at 11% for 3 years = $114,000 x 1/( 1 + 11%)^3 = $83,355.82
Present value of recoverable value of note = Recoverable value of note x Discount factor at 11% for 3 years = $85,500 x 1/( 1 + 11%)^3 = $62,516.86
Now calculate the impairment loss as follow
Impairment loss = Present value of Note - Present value of recoverable value of note = $83,355.82 - $62,516.86 = $20,838.96 = $20,839
The typical horizontal flows of information in an accounts payable/cash disbursements process might include all of the following except:
a. an invoice is received from a vendor
b. the paid voucher is returned to the accounts payable department
c. an approved disbursement voucher is sent to the cashier
d. a copy of a receiving report is sent to the cashier
Answer:
d. a copy of a receiving report is sent to the cashier
Explanation:
In the case of the horizontal flows with respect to the account payable or cash disbursements, it involved the invoice i.e. collected from the vendor, the voucher i.e. returned and the approved disbursement voucher is sent to the cashier but it does not involve the receiving report that sent to the cashier
Therefore the correct option is d.
The following is a list of account titles and amounts (in millions) reported at December 27, 2015, by Hashey, Inc. a leading manufacturer of games, toys, and interactive entertainment software for children and families:
Accounts Receivable $1,119 Equipment $496
Accumulated Amortization 751 Goodwill 601
Accumulated Depreciation 506 Inventories 356
Allowance for Doubtful Accounts 35 Land 10
Buildings 246 Licensing Rights 1,841
Cash and Cash Equivalents 686 Prepaid Rent 361
Required:
Prepare the asset section of a classified balance sheet for Hashey, Inc.
Answer and Explanation:
The preparation of the asset section of the classified balance sheet is presented below;
ASSETS
Current assets:
Cash and cash equivalents $686
Accounts receivable $1,119
Less: Allowance for doubtful accounts ($35)
Accounts receivable (net) $1,084
Inventory $356
Prepaid rent $361
Total current assets $2,487
Property, Plant and Equipment:
Land $10
Buildings $246
Equipment $496
Property, Plant and Equipment (at cost) $752
Less: Accumulated depreciation ($506)
Total Property, Plant and Equipment (net) $246
Other assets
Licensing rights $1,846
Goodwill $601
Less: Accumulated amortization ($751)
Other assets (Net) $1,691
Total assets $4,424
Suppose that Musashi, an economist from an AM talk radio program, and Rina, an economist from a university in Massachusetts, are arguing over health insurance. The following dialogue shows an excerpt from their debate:
Rina: A popular topic for debate among politicians as well as economists is the idea of providing government assistance for health benefits.
Musashi: I think it is oppressive for the government to tax people who take care of themselves in order to pay for health insurance for those who are obese.
Rina: I disagree. I think government funding of health insurance is useful to ensure basic fairness.
The disagreement between these economists is most likely due to:
a. Differences in scientific judgments
b. Differences in Values
c. Differences between perception VS. reality
Despite their differences, with which proposition are two economists chosen at random most likely to agree?
a. Lawyers make up an excessive percentage of elected officials.
b. Minimum wage laws do more to harm low-skilled workers than help them.
c. Tariffs and import quotas generally reduce economic welfare.
Answer:
b. Differences in Valuesc. Tariffs and import quotas generally reduce economic welfare.Explanation:
Economists are known to disagree with each other a lot especially when they adhere to different economic theories such as the Neoclassic or Keynesian theories. In this case, these economists having opposing viewpoints in relation to what the government is doing in regards to health insurance is most probably due to different economic values they hold.
Regardless of the values they subscribe to however, most economists usually support certain propositions and one of them is free trade. They believe that the presence of tariffs and import quotas serve to reduce economic welfare as there are deadweight losses and things are more expensive for consumers.
Jamison Company uses the total cost method of applying the cost-plus approach to product pricing. Jamison produces and sells Product X at a total cost of $1,000 per unit, of which $680 is product cost and $320 is selling and administrative expenses. In addition, the total cost of $1,000 is made up of $570 variable cost and $430 fixed cost. The desired profit is $200 per unit.
Required:
Determine the markup percentage on total cost.
Answer:
the markup percentage on total cost is 20 %
Explanation:
Mark up = Profit / Total Cost x 100
where,
Total Cost = $1,000
Profit = $200
therefore,
Mark up = $200 / $1,000 x 100 = 20 %
thus,
the markup percentage on total cost is 20 %
The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called
Answer:
Agency theory.
Explanation:
A corporation can be defined as a corporate organization that has facilities and owns or controls assets used for the production of goods and services in at least one country other than its headquarter (home office) located in its home country.
This ultimately implies that, a corporation is a corporate organization that owns or controls its business in two or more countries.
Typically, it is considered to be one of the most complicated and expensive type of organization. Generally, a corporation is considered to be perpetual in nature and it is a body that comprises of a group of people such as directors, shareholders etc., who act as a single entity.
One of the advantage of a corporation is that, owners have limited liability for debt to the extent to which they have invested and as such are not personally liable for some of debt owed by corporation.
The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called agency theory.
GHI Corporation, a California corporation, has a six-person board. At a regular board meeting, only two directors attend. No notice was sent to any of the directors. The two attending call directors Alice and Bob and put them on a conference call. The four talk about the corporation buying Blackacre and then all agree to a resolution for GHI to buy Blackacre from Third Party. The Bylaws of GHI state that an action of the board requires the consent of a majority of the directors present at a meeting, and that a quorum is a majority of the authorized directors.
Select one:
a. the purchase is authorized because a quorum was present and a majority of those present approved the action.
b. the purchase is not authorized, since all real estate transactions require shareholder approval
c. the purchase is not authorized because prior written notice must be sent to each director
d. the purchase is not authorized because a quorum was not present at the board meeting
e. Two of the above are correct.
Answer:
a. the purchase is authorized because a quorum was present and a majority of those present approved the action.
Explanation:
going by the bye laws of GHI state, board action requires that majority of the members of the board are present and give consent in the meeting. here in this question, we have a 6 member board. Although only two of the board members are physically present, through conference call Alice and Bob increased the number to 2 when they joined in. Therefore the number of board members at this meeting is 4, then the requirement has been met. So since this 4 agreed to the purchase, it is authorized and valid since a quorum was present and a majority of them agreed to the action. option a is correct
The correct statement is a. the purchase is authorized because a quorum was present and, a majority of those present approved the action.
The quorum required by the Bylaws of GHI is for a majority of directors to be present, and in this case, four directors were present (two physically and two by conference call).
The Bylaws of GHI specify that every action of the directors should be supported by a majority present at a meeting. We can conclude that the purchase is authorized by the majority (100%).
Thus, the purchase of Blackacre by GHI is authorized.
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______contains journal vouchers of past periods for audit trail
Answer:
Journal voucher history file
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 4 percent 3 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 22 percent.
Answer:
Pretax cost of debt = 3.48%
Aftertax cost of debt = 2.71%
Explanation:
Missing word "What is the pretax cost of debt and aftertax cost of debt"
Coupon rate = 4%
YTM = 22
Nper = YTM*2 = 44
PMT = 1000*4%/2 = 20
FV = 1000
PV = 1080
Rate = rate(nper, pmt, -pv, fv)
Rate = rate(44, 20, -1080, 1000)
Rate = 0.0174
Rate = 1.74%
Pretax cost of debt = Rate * 2
Pretax cost of debt = 1.74% * 2
Pretax cost of debt = 3.48%
Aftertax cost of debt = [3.48% * (1 - 0.22)]
Aftertax cost of debt = 3.48% * 0.78
Aftertax cost of debt = 0.0348 * 0.78
Aftertax cost of debt = 0.027144
Aftertax cost of debt = 2.71%
Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,000 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,000 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $600 + $0.35 per mile.
Required:
1. Determine how many miles Russell needs to drive to break even k-Even Miles Miles.
2. Assume Russell drove 1,800 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month.
3. Determine how many miles Russell must drive to earn $1,000 in profit.
Answer:
Russell Preston
1. The miles Russell needs to drive to break even is:
= 1,500 miles.
2. If Russel drove 1,800 miles last month, he earned a profit.
3. To earn a profit of $1,000, the miles Russell must drive are:
= 4,000 miles
Explanation:
a) Data and Calculations:
Selling price per mile driven = $0.75
Average operating cost for driving 3,000 miles = $0.55 per mile
Total operating cost for 3,000 miles = $1,650 ($3,000 * $0.55)
Average operating cost for driving 4,000 miles = $0.50 per mile
Total operating for 4,000 miles = $2,000 (4,000 * $0.50)
Total cost function = $600 + $0.35 per mile using the high-low method
Variable cost per mile = $0.35
Fixed cost per month = $600
Contribution margin per mile = $0.40 ($0.75 - $0.35)
Contribution margin ratio = 0.5333
To break-even, Russel must drive = $600/$0.40 = 1,500 miles
At this mileage, his total costs = $1,125 ($600 + $0.35 * 1,500)
At this mileage, his total revenue = $1,125 ($0.75 * 1,500)
To earn a profit of $1,000, Russell must drive = ($600 + $1,000)/$0.40
= 4,000 miles
Interest rate (with changing years). Keiko is looking at the following investment choices and wants to know what annual rate of return each choice produces. a. Invest $360.00 and receive $788.17 in 11 years. b. Invest $3 comma 000.00 and receive $11 comma 499.87 in 17 years. c. Invest $31 comma 542.31 and receive $140 comma 000.00 in 22 years. d. Invest $32 comma 895.12 and receive $1 comma 100 comma 000.00 in 40 years.
Answer:
7.38%
8.23%
7.01%
9.17%
Explanation:
Rate of return = (future value / amount invested)^(1/n) - 1
n = number of years
a. (788.17 / 360)^(1/11) - 1 = 7.38%
b. (11.499.87 / 3000) ^(1/17) - 1 = 8.23
c. (140,000 / 31,542.31)^(1/22) - 1 = 7.01
d. (1,100,000 / 32895.12)^(1/40) - 1 = 9.17
Item7 Item 7 Boccardi Inc., has invested in new pasta manufacturing equipment at a cost of $48,000. The equipment has an estimated useful life of eight years. Estimated annual sales and operating expenses related to the pasta equipment follow: Annual sales $ 88,000 Labor costs (72,000 ) Depreciation of equipment (6,000 ) Operating income $ 10,000 Income taxes (4,000 ) Net income $ 6,000 The estimated accounting rate of return is:
Answer:
12.5%
Explanation:
Accounting rate of return = (Net Income / Equipment cost) * 100
Accounting rate of return = ($6000/$48000)*100
Accounting rate of return = 0.125 * 100
Accounting rate of return = 12.5%
So, the estimated accounting rate of return is 12.5%.
Consider a $6500 piece of machinery, with a 5-year depreciable life and an estimated $1200 salvage value. The projected utilization of the machinery when it was purchased, and its actual production to date, are as follows:
Year Projected Production (Tons) Actual Production (Tons)
1 3500 3000
2 4000 5000
3 4500 [Not]
4 5000 Yet
5 5500 [Known]
Compute the depreciation using :
a. straight line
b. sum of years digits
c. double declining balance
d. Unit of production (for the first 2 years only)
e. Modified accelerated cost recovery system
Answer:
Hence the answer is given as follows,
Explanation:
example of business proposal
A south sea island produces only coconuts. In 2015, the price of a coconut is $1.00 and the quantity produced is 250 . In 2019 , the price of a coconut is $0.50 and the quantity produced is 200 . 2015 is the base year. What is real GDP in 2019 ?
Answer:
the real GDP in 2019 is $200
Explanation:
The computation of the real GDP is shown below;
= Base year price × quantity produced in 2019
= $1 × 200
= $200
Hence, the real GDP in 2019 is $200
The above should be used to determine the real GDP in 2019 and the same should be relevant
Analyzing the Impact of Selected Transactions on the Current Ratio [LO 13-4, LO 13-5]
In its most recent annual report, Sunrise Enterprises reported current assets of $1,090,000 and current liabilities of $602,000.
Required:
Determine for each of the following transactions whether the current ratio, and each of its two components, for Sunrise will increase, decrease, or have no change: (1) sold long-term assets for cash, (2) accrued severance pay for terminated employees, (3) wrote down the carrying value of certain inventory items that were deemed to be obsolete, and (4) acquired new inventory by signing an 18-month promissory note (the supplier was not willing to provide normal credit terms).
Answer:
Sunrise Enterprises
Impact of Selected Transactions on the Current Ratio:
Current Ratio Current Assets Current Liabilities
(1) increase increase no change
(2) decrease no change increase
(3) decrease decrease no change
(4) increase increase no change
Explanation:
a) Data and Calculations:
Current assets = $1,090,000
Current liabilities = $602,000
Current ratio = 1.8 ($1,090,000/$602,000)
b) The current ratio (the ratio of current assets to current liabilities) is affected by increases or decreases in current assets without equal increases or decreases in current liabilities and vice versa.
Regardless of his income and regardless of prices, Smedley always spends 25% of his income on housing, 10% on clothing, 30% on food, 15% on transportation, and 20% on recreation. This behavior is consistent with which of the following?
a. All goods are perfect substitutes.
b. Smedley's demands for commodities do not change when their prices change.
c. Smedley consumes all goods in fixed proportions.
d. Smedley has a Cobb-Douglas utility function.
e. More than one of the above.
Answer: D. Smedley has a Cobb-Douglas utility function.
Explanation:
Utility is the satisfaction that a customer gets when he or she uses a particular good or service.
Since we're informed that regardless of his income and regardless of prices, Smedley always spends 25% of his income on housing, 10% on clothing, 30% on food, 15% on transportation, and then spends 20% on recreation, this behavior is consistent with a Cobb-Douglas utility function.
In this case, the goods aren't perfect substitute as they do not serve safe function. Also, Smedley doesn't consumes all goods in fixed proportions. Therefore, the correct option is D.
On April 2, Rolex SA sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 of sales was received on April 8 and the remaining payment on $16,000 of sales was received on April 27. Assuming Rolex uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a:_____.
a. Debit to cash for $15,840.
b. Debit to revenue for $40,000.
c. Credit to sales discounts forfeited for $160.
d. Debit to accounts receivable for $400.
Answer:
c. Credit to sales discounts forfeited for $160.
Explanation:
Based on the information given the entry recorded on April 27 would include a: CREDIT TO SALES DISCOUNTS FORFEITED FOR $160
($16,000*1%=$160)
The journal entries are:
A. Dr Accounts receivable $160
Cr Sales Discount forfeited $160
B. Dr Cash $16,000
Cr Accounts receivable $16,000
A company's beginning Work in Process inventory consisted of units that were 90 % complete with respect to direct labor A total of were finished during the period and remaining in Work in Process inventory were 40 % complete with respect to direct labor at the end of the period . Using the weighted average method the equivalent units of production with regard to direct labor were :
Answer: 109,800 units
Explanation:
Equivalent Units of Production with respect to Direct Labor can be calculated as:
= Units completed during the period + Equivalent ending Work in Process Inventory (1)
Equivalent ending Work in Process Inventory = 32,000 ending units * 40% completion with respect to direct labor
= 12,800 units
EUP direct labor = 97,000 + 12,800 (1)
= 109,800 units
4. Social responsibility is an area of business with issues that
A. are easy to resolve.
B. change constantly in response to society's demands.
C. stay constant due to consistent societal demands.
D. change occasionally in response to society's demands.
Social responsibility is an area of business that changes occasionally in response to society's demands. So the correct option is D.
How does the business determine society's demands?Businesses must decide what to produce to satisfy the needs and wants of the society or consumer. Business determined the taste, preference of the consumer, and level of income, fashionable trends also help.
The business firm also contributes to the growth of society by bringing innovation in the market, to provide better facilities for the consumer.
Therefore the correct option is D.
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Checking accounts at a local bank carry an average balance of $3000. The bank turns over its balance 3 times a year. On average, how many dollars flow through the bank each month?
Answer:
75,000
Explanation:
I think? not shure
The Pizza Company is considering a new three-year expansion project. The key data are shown below:
The company hired a consulting firm to help evaluate the project and paid the consulting fee of $60,000. The company owns the space. If company did not invest in the project, it can receive after-tax rental fee for $300,000 per year for 3 years. However, if the
company invested in the project, it will use the space for the project.
The fixed cost to produce pizza is required at $150,000 per year.
It is estimated that 50,000 units will be sold in the first year and that 40,000 units and 30,000 units will be sold in the second and third years respectively.
Each pizza is expected to sell for $25 and the production cost will be $15 per unit.
The sales price and variable cost should increase with inflation. Expected inflation rate per year is 5%.
The project requires an initial investment in working capital of $500,000, which will be required in each year at 10% of revenue in the following year.
The purchase of the machinery at the start of the project is $1,000,000. The shipping and installation cost are $200,000. The machinery will be depreciated straight-line to zero. It is estimated that the machinery can be sold at the end of the project for $250,000.
To finance the project, the company would need to take a one-million dollar loan at 8% interest rate p.a. from HSBC over the life of the project. Annual interest expense is $80,000.
The corporate tax rate is 34%.
The Pizza Company is evaluating its cost of capital under alternative financing arrangements. In consultation with the consulting firm, the Pizza Company expects to be able to issue new Debt at Par with a coupon rate of 8% (coupons paid annually) and to issue new preferred stock with a $4 per share dividend at $32 a share. The common stock of the Pizza Company is currently selling for $22 a share while its book value is $6. The Pizza Company expects to pay a total
dividend of $525,000 for its 200,000 common shares outstanding next year. Market analysts foresee a growth in dividends of the company at the rate of 4% per year. The Pizza Company raises capital using 30% bond, 20% preferred stock, and 50% common stock
a. What is the cost of capital (WACC) of the Pizza Company?
b. Calculate the NPV of the project using the cost of capital calculated in part (a).
Should the project be accepted?
Answer:
dividend of $525,000 for its 200,000 common shares outstanding next year. Market analysts foresee a growth in dividends of the company at the rate of 4% per year. The Pizza Company raises capital using 30% bond, 20% preferred stock, and 50% common stock
a. What is the cost of capital (WACC) of the Pizza Company?
b. Calculate
The Browns plan to fly to their vacation spot and then drive through the mountains. They arranged to rent a sedan for $37.45 per day with no charge for mileage. What will it cost the Browns to rent a car for 10 days if they spend $78 for gasoline and $16.75 for miscellaneous items
Answer:
$469.25
Explanation:
total cost = total cost of renting car + cost of gas + miscellaneous items
total cost of renting car = 37.45 x 10 = 374.5
374.5 + 78 + 16.75 = 469.25
describe the term marginal cost?
Answer:
In economics, the marginal cost of production is the change in total production cost that comes from making or producing one additional unit. To calculate marginal cost, divide the change in production costs by the change in quantity.
Answer:
The cost of production is marginal. Fixed and variable costs included. With regard to fixed costs, this is only calculated at the marginal cost of production is to be expanded. In contrast, marginal costs always include variable costs.
Explanation:
THE IMPORTANCE OF MARGINAL COST:
In economics, marginal costs are important as they help companies to maximize profits. When marginal costs are equal to marginal income, we have so-called profit maximization. In this respect, the cost of producing a further product is exactly the same as the sales of the company. That is, the company does not make money at that point anymore.
As seen from the below marginal costs curve, marginal costs begin to decrease as the company benefits from scale savings. Marginal costs can however increase with businesses declining in productivity and suffering from scale disadvantages. Costs are increasing and they ultimately receive marginal income.
It could be because the company becomes too big and inefficient, or because the management problem gets less productive and demotivated. Whatever the reason, companies may have to face up to rising costs and stop production if their income is identical to the marginal price.
Rodger's Cabinet Manufacturers uses flexible budgets that are based on the following manufacturing data for the month of July:
Direct materials $8 per unit
Direct labor $5 per unit
Electric power (variable) $0.30 per unit
Electric power (fixed) $4,000 per month
Supervisor salaries $25,000 per month
Property taxes on factory $4,000 per month
Straight-line depreciation $2,900 per month
Prepare a flexible budget for Rodger's based on production of 10,000, 15,000, and 20,000 units.
Rodger's Cabinet Manufacturers Flexible Manufacturing Budget For the Month Ended July 31
Answer:
Rodger's Cabinet Manufacturers
Rodger's Cabinet Manufacturers
Flexible Budget for the Month Ended July 31
10,000 units 15,000 units 20,000 units
Variable Costs:
Direct materials $8 per unit $80,000 $120,000 $160,000
Direct labor $5 per unit 50,000 75,000 100,000
Electric power (variable) $0.30 3,000 4,500 6,000
Total variable costs $133,000 $199,500 $266,000
Fixed costs:
Electric power (fixed) 4,000 4,000 4,000
Supervisor salaries 25,000 25,000 25,000
Property taxes on factory 4,000 4,000 4,000
Straight-line depreciation 2,900 2,900 2,900
Total fixed costs $35,900 $35,900 $35,900
Total costs $169,400 $235,400 $301,900
Explanation:
a) Data and Calculations:
Direct materials $8 per unit
Direct labor $5 per unit
Electric power (variable) $0.30 per unit
Electric power (fixed) $4,000 per month
Supervisor salaries $25,000 per month
Property taxes on factory $4,000 per month
Straight-line depreciation $2,900 per month