Answer:
June 4 Sold $650 of merchandise (that had cost $400) on credit to Natara Morris.
June 4
Dr Accounts receivable 650
Cr Sales revenue 650
June 4
Dr Cost of goods sold 400
Cr Inventory 400
5 Sold $6,900 of merchandise (that had cost $4,200) to customers who used their Zisa cards.
June 5
Dr Accounts receivable 6,693
Dr Credit card fees 207
Cr Sales revenue 6,900
June 5
Dr Cost of goods sold 4,200
Cr Inventory 4,200
June 5, after Zisa transfers the money
Dr Cash 6,693
Cr Accounts receivable 6,693
6 Sold $5,850 of merchandise (that had cost $3,800) to customers who used their Access cards.
June 6
Dr Unbilled revenue 5,733
Dr Credit card fees 117
Cr Sales revenue 5,850
June 6
Dr Cost of goods sold 3,800
Cr Inventory 3,800
8 Sold $4,350 of merchandise (that had cost $2,900) to customers who used their Access cards.
June 8
Dr Unbilled revenue 4,263
Dr Credit card fees 187
Cr Sales revenue 4,350
June 8
Dr Cost of goods sold 2,900
Cr Inventory 2,900
10 Submitted Access card receipts accumulated since June 6 to the credit card company for payment.
June 10
Dr Accounts receivable 9,996
Cr Unbilled revenue 9,996
13 Wrote off the account of Abigail McKee against the Allowance for Doubtful Accounts. The $429 balance in McKee’s account stemmed from a credit sale in October of last year.
June 13
Dr Bad debt expense 429
Cr Allowance for doubtful accounts 429
17 Received the amount due from Access.
June 17
Dr Cash 9,996
Cr Accounts receivable 9,996
18 Received Morris’s check in full payment for the purchase of June 4.
June 18
Dr Cash 650
Cr Accounts payable 650
Wolford Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company’s fiscal year on November 30, 2017, these accounts appeared in its adjusted trial balance.
Accounts Payable $ 26,800
Accounts Receivable 17,200
Accumulated Depreciation—
Equipment 68,000
Cash 8,000
Common Stock 35,000
Cost of Goods Sold 614,300
Freight-Out 6,200
Equipment 157,000
Depreciation Expense 13,500
Dividends 12,000
Gain on Disposal of Plant Assets 2,000
Income Tax Expense 10,000
Insurance Expense 9,000
Interest Expense 5,000
Inventory 26,200
Notes Payable 43,500
Prepaid Insurance 6,000
Advertising Expense 33,500
Rent Expense 34,000
Retained Earnings 14,200
Salaries and Wages Expense 117,000
Sales Revenue 904,000
Salaries and Wages Payable 6,000
Sales Returns and Allowances 20,000
Utilities Expense 10,600
Answer:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000 )
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000 Advertising Expense $33,500 Rent Expense $34,000 Depreciation Expense $13,500 Insurance Expense $9,000 Utilities Expense $10,600Freight-Out $6,200Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain on Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000 )
Income before income taxes $42,900
Income Tax Expense ($10,000)
Net income after taxes $32,900
Wolford Department Store
Balance Sheet
For the Year Ended November 30,2017
Assets:
Cash $8,000
Accounts Receivable $17,200
Prepaid Insurance $6,000
Inventory $26,200
Equipment $157,000
Accumulated Depreciation - Equipment (68,000)
Total Assets: $146,400
Liabilities and Stockholders' Equity:
Accounts Payable $26,800
Wages Payable $6,000
Notes Payable $43,500
Common Stock $35,000
Retained Earnings $35,100
Total Liabilities and Stockholders' Equity: $146,400
Wolford Department Store
Statement of Retained Earnings
For the Year Ended November 30,2017
Retained earnings at the beginning of the period: $14,200
Net income after taxes: $32,900
Dividends ($12,000)
Retained earnings at he end of the period: $35,100
a. The Wolford Department Store's Multi-level Income Statement, Balance Sheet, and Statement of Retained Earnings as of November 30, 2017 are as follows:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000)
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000
Advertising Expense 33,500
Rent Expense 34,000
Depreciation Expense 13,500
Insurance Expense 9,000
Utilities Expense 10,600
Freight-out 6,200
Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $42,900
Income Tax Expense ($10,000)
Net Income After Taxes $32,900
Wolford Department Store
Balance Sheet
As of November 30,2017
Assets:
Current Assets:
Cash $8,000
Accounts Receivable 17,200
Prepaid Insurance 6,000
Inventory 26,200
Current assets $57,400
Long-term assets:
Equipment $157,000
Accumulated Depreciation (68,000) $89,000
Total Assets $146,400
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $26,800
Wages Payable 6,000
Current liabilities $32,800
Long-term liabilities
Notes Payable $43,500
Total liabilities $76,300
Equity:
Common Stock $35,000
Retained Earnings 35,100
Total Equity $70,100
Total Liabilities & Stockholders' Equity $146,400
Wolford Department Store
Statement of Retained Earnings
As of November 30,2017
Retained earnings 1 Dec. 2016 $14,200
Net income after taxes 32,900
Dividends ($12,000)
Retained earnings, Nov. 30, 2017 $35,100
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $32,900/$884,000 x 100
= 3.72%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $269,700/$884,000 x 100
= 30.51%
c. If the net sales increases by 15%, the Net sales = $1,016,600 ($884,000 x 1.15)
If Gross profit increases by $40,443, the Gross profit = $310,143 ($269,700 + $40,443)
If Expenses increase by $58,600, the total operating Expenses = $282,400 ($223,800 + $58,600)
Revised Net Income:
Gross Profit $310,143
Total operating expenses (282,400)
Income from operations $27,743
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $24,743
Income Tax Expense ($10,000)
Net Income After Taxes $14,743
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $14,743/$1,016,600 x 100
= 1.45%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $310,143/$1,016,600 x 100
= 30.51%
d. With the proposed changes, the gross profit rate remains the same (without any impact) because the net sales increased by the same rate (15%) as the cost of goods sold and the gross profit.
However, the net income reduced drastically, especially with the income tax remaining the same amount.
Thus, without the income tax effect, there is no merit in this proposal as it reduced the net income margin from 3.72% to 1.45%.
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You are looking to buy a car. You can afford $700 in monthly payments for five years. In addition to the loan, you can make a $800 down payment. If interest rates are 9.25 percent APR, what price of car can you afford (loan plus down payment)
Answer:
$34,333
Explanation:
A fix periodic payment for a specific period of time is an annuity payment. Price of the car can be determined by the sum of the present value of all payments and down payment made.
First we need o calculate the present value of annuity using following formula
Present value of annuity = P x [ 1 - ( 1 + r )^-n / r ]
P = periodic payment = $700
r = APR = 9.25 /12% = 0.77%
n = numbers of periods = 5 years x 12 months per year = 60 months
Placing values in the formula
Present value of annuity = $700 x [ 1 - ( 1 + 0.77% )^-60 / 0.77% ]
Present value of annuity = $33,532.88
Price of the car = Present value of annuity + Down Payment
Price of the car = $33,532.88 + $800 = $34,332.88
Sunset Corporation (a C corporation) had operating income of $200,000 and operating expenses of $175,000. In addition, Sunset had a $30,000 long-term capital gain, a $52,000 short-term capital loss, and $5,000 tax-exempt interest income. What is Sunset Corporation's taxable income for the year
Answer:
Sunset Corporation's taxable income is $3,000
Explanation:
Calculation of Sunset Corporation's taxable income is as worked below
Taxable Income = Operating Income - Operating Expenses + Capital Gains - Capital Losses
Taxable Income = $200,000 - $175,000 + $30,000 - $52,000
Taxable Income = $3,000. Hence, Sunset Corporation's taxable income is $3,000
Note that taxable income is the amount of income used to calculate how much tax an individual or a company owes or is going to pay the government in a particular tax year.
Laser World reports net income of $620,000. Depreciation expense is $47,000, accounts receivable increases $11,000, and accounts payable decreases $27,000. Calculate net cash flows from operating activities using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)
Answer:
$629,000
Explanation:
The net cash flow from operating activities is the net income plus depreciation, minus the increase in accounts receivable as well as the decrease in accounts payable.
Net income is $620,000
depreciaton expense $47,000
Increase in accounts receivable ($11,000)
decrease in accounts payable ($27,000)
Net cash flow from operations $629,000
The increase in accounts receivable denies the business of additional cash,hence it is deducted ,the same applies to increase in accounts payable
Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $10. At the start of January 2015, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash $2,360,000
Accounts Receivable 152,000
Supplies 19,100
Equipment 948,000
Land 1,920,000
Building 506,000
Accounts Payable 109,000
Unearned Revenue 152,000
Notes Payable (due 2018) 80,000
Common Stock 2,200,000
Retained Earnings 3,364,100
In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.
Required:
1. Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and − for decrease) of each transaction. (Enter any decreases to account balances with a minus sign.)
a. Received $52,250 cash from customers for subscriptions that had already been earned in 2014.
b. Received $235,000 cash from Electronic Arts, Inc. for service revenue earned in January.
c. Purchased 10 new computer servers for $41,900; paid $12,000 cash and signed a three-year note for the remainder owed.
d. Paid $15,600 for an Internet advertisement run on Yahoo! in January.
e. Sold 10,100 monthly subscriptions at $10 each for services provided during January. Half was collected in cash and half was sold on account.
f. Received an electric and gas utility bill for $5,900 for January utility services. The bill will be paid in February.
g. Paid $310,000 in wages to employees for work done in January.
h. Purchased $5,100 of supplies on account.
i. Paid $5,100 cash to the supplier in (h).
2. Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference.
3. Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts.
4. Prepare an unadjusted trial balance as of January 31, 2015.
Answer:
Vanishing Games Corporation (VGC)
1. Analysis of the effect of transactions on the accounting equation:
Assets = Liabilities + Equity
Assets (Cash) increases +$52,500 and Assets (Accounts Receivable) decreases -$52,500 = Liabilities + Equity.
b. Assets (Cash) increases +$235,000 = Liabilities + Equity (Retained Earnings) increase + $235,000.
c. Assets (Equipment) increases +41,900; Cash decreases -$12,000 = Liabilities (Notes Payable) increase +$29,900 + Equity.
d. Assets (Cash) decreases -$15,600 = Liabilities + Equity (Retained Earnings) decrease - $15,600.
e. Assets (Cash) increases + $50,500 and (Accounts Receivable) increases + $50,500 = Liabilities + Equity (Retained Earnings) increase + $101,000.
f. Assets = Liabilities (Accounts Payable) increase +$5,900 + Equity (Retained Earnings) decrease -$5,900.
g. Assets (Cash) decreases - $310,000 = Liabilities + Equity (Retained Earnings) decreases - $310,000.
h. Assets (Supplies) increase + $5,100 = Liabilities (Accounts Payable) increase +$5,100 + Equity.
i. Assets (Cash) decreases - $5,100 = Liabilities (Accounts Payable) decrease - $5,100 + Equity.
2. Journal Entries:
a. Debit Cash Account $52,500
Credit Accounts Receivable $52,500
To record cash from customers.
b. Debit Cash Account $235,000
Credit Service Revenue $235,000
To record cash for service revenue.
c. Debit Equipment $41,900
Credit Cash Account $12,000
Credit Notes Payable $29,900
To record purchase of 10 new computer services
d. Debit Advertising Expense $15,600
Credit Cash Account $15,600
To record payment for advertising.
e. Debit Cash Account $50,500
Debit Accounts Receivable $50,500
Credit Service Revenue $101,000
To record subscriptions for services sold.
f. Debit Utilities Expense $5,900
Credit Utilities Payable $5,900
To record utilities expense.
g. Debit Wages & Salaries Expense $310,000
Credit Cash Account $310,000
To record wages paid.
h. Debit Supplies Account $5,100
Credit Accounts Payable $5,100
To record purchase of supplies on account.
i. Debit Accounts Payable $5,100
Credit Cash Account $5,100
To record payment on account.
3. T-Accounts:
Cash Account
Beginning Balance $2,360,000 c. Equipment 12,000
a. Accounts Receivable 52,250 d. Advertising Expense 15,600
b. Electronic Arts, Inc. 235,000 g. Wages & Salaries 310,000
e. Service Revenue 50,500 i. Accounts Payable 5,100
Balance c/d 2,355,050
2,697,750 2,697,750
Balance b/d 2,355,050
Accounts Receivable
Beginning Balance 152,000 a. Cash 52,250
e. Service Revenue 50,500 Balance c/d 150,250
202,500 202,500
Balance b/d 150,250
Supplies
Beginning Balance 19,100 Balance c/d 24,200
Accounts Payable 5,100
24,200 24,200
Balance b/d 24,200
Equipment
Beginning Balance 948,000 Balance c/d 989,900
c. Cash 12,000
c. Notes Payable 29,900
989,900 989,900
Balance b/d 989,900
Land
Beginning Balance 1,920,000
Building
Beginning Balance 506,000
Accounts Payable
i. Cash 5,100 Beginning Balance 109,000
Balance c/d 109,000 h. Supplies 5,100
114,100 114,100
Balance b/d 109,000
Unearned Revenue
Beginning Balance 152,000
Advertising Expense
d. Cash 15,600
Utilities Expense
f. Utilities Payable 5,900
Utilities Payable
f. Utilities Expense 5,900
Wages & Salaries Expense
g. Cash 310,000
Service Revenue
b. Cash 235,000
Balance c/d 336,000 e. Cash 50,500
e. Accounts Receivable 50,500
336,000 336,000
Balance b/d 336,000
Notes Payable (due 2018)
Balance c/d 109,900 Beginning Balance 80,000
c. Equipment 29,900
109,900 109,900
Balance b/d 101,000
Common Stock
Beginning Balance 2,200,000
Retained Earnings
Beginning Balance 3,364,100
4. Trial Balance as at January 31:
Debit Credit
Cash $2,355,050
Accounts Receivable 150,250
Supplies 24,200
Equipment 989,900
Land 1,920,000
Building 506,000
Advertising expense 15,600
Utilities Expense 5,900
Utilities Payable $5,900
Wages & Salaries 310,000
Service Revenue 336,000
Notes Payable 109,900
Accounts Payable 109,000
Unearned Revenue 152,000
Common Stock 2,200,000
Retained Earnings 3,364,100
Total $6,276,900 $6,276,900
Explanation:
a) Note: the adjustment of the Utilities could have been eliminated to produce the same result, with totals reduced by $5,900.
Answer 1:
Analysis of the effect of transactions on the accounting equation:
Assets = Liabilities + Equitya. Assets (Cash) increases +$52,500 and Assets (Accounts Receivable) decreases -$52,500 = Liabilities + Equity.
b. Assets (Cash) increases +$235,000 = Liabilities + Equity (Retained Earnings) increase + $235,000.
c. Assets (Equipment) increases +41,900; Cash decreases -$12,000 = Liabilities (Notes Payable) increase +$29,900 + Equity.
d. Assets (Cash) decreases -$15,600 = Liabilities + Equity (Retained Earnings) decrease - $15,600.
e. Assets (Cash) increases + $50,500 and (Accounts Receivable) increases + $50,500 = Liabilities + Equity (Retained Earnings) increase + $101,000.
f. Assets = Liabilities (Accounts Payable) increase +$5,900 + Equity (Retained Earnings) decrease -$5,900.
g. Assets (Cash) decreases - $310,000 = Liabilities + Equity (Retained Earnings) decreases - $310,000.
h. Assets (Supplies) increase + $5,100 = Liabilities (Accounts Payable) increase +$5,100 + Equity.
i. Assets (Cash) decreases - $5,100 = Liabilities (Accounts Payable) decrease - $5,100 + Equity.
Answer 2:
Journal Entriesa. Debit Cash Account $52,500
Credit Accounts Receivable $52,500
(To record cash from customers)
b. Debit Cash Account $235,000
Credit Service Revenue $235,000
(To record cash for service revenue)
c. Debit Equipment $41,900
Credit Cash Account $12,000
Credit Notes Payable $29,900
(To record purchase of 10 new computer services)
d. Debit Advertising Expense $15,600
Credit Cash Account $15,600
(To record payment for advertising.)
e. Debit Cash Account $50,500
Debit Accounts Receivable $50,500
Credit Service Revenue $101,000
(To record subscriptions for services sold)
f. Debit Utilities Expense $5,900
Credit Utilities Payable $5,900
(To record utilities expense)
g. Debit Wages & Salaries Expense $310,000
Credit Cash Account $310,000
(To record wages paid)
h. Debit Supplies Account $5,100
Credit Accounts Payable $5,100
(To record purchase of supplies on account)
i. Debit Accounts Payable $5,100
Credit Cash Account $5,100
(To record payment on account)
Answer 3:
T-AccountsCash Account
Beginning Balance $2,360,000 c. Equipment 12,000
a. Accounts Receivable 52,250 d. Advertising Expense 15,600
b. Electronic Arts, Inc. 235,000 g. Wages & Salaries 310,000
e. Service Revenue 50,500 i. Accounts Payable 5,100
Balance c/d 2,355,050
Total 2,697,750 2,697,750
Balance b/d 2,355,050
Accounts Receivable
Beginning Balance 152,000 a. Cash 52,250
e. Service Revenue 50,500 Balance c/d 150,250
Total 202,500 202,500
Balance b/d 150,250
Supplies
Beginning Balance 19,100 Balance c/d 24,200
Accounts Payable 5,100
Total 24,200 24,200
Balance b/d 24,200
Equipment
Beginning Balance 948,000 Balance c/d 989,900
c. Cash 12,000
c. Notes Payable 29,900
Total 989,900 989,900
Balance b/d 989,900
Land
Beginning Balance 1,920,000
Building
Beginning Balance 506,000
Accounts Payable
i. Cash 5,100 Beginning Balance 109,000
Balance c/d 109,000 h. Supplies 5,100
Total 114,100 114,100
Balance b/d 109,000
Unearned Revenue
Beginning Balance 152,000
Advertising Expense
d. Cash 15,600
Utilities Expense
f. Utilities Payable 5,900
Utilities Payable
f. Utilities Expense 5,900
Wages & Salaries Expense
g. Cash 310,000
Service Revenue
b. Cash 235,000
Balance c/d 336,000 e. Cash 50,500
e. Accounts Receivable 50,500
Total 336,000 336,000
Balance b/d 336,000
Notes Payable (due 2018)
Balance c/d 109,900 Beginning Balance 80,000
c. Equipment 29,900
Total 109,900 109,900
Balance b/d 101,000
Common Stock
Beginning Balance 2,200,000
Retained Earnings
Beginning Balance 3,364,100
Answer 4:Trial Balance as at January 31:
Debit Credit
Cash $2,355,050
Accounts Receivable 150,250
Supplies 24,200
Equipment 989,900
Land 1,920,000
Building 506,000
Advertising expense 15,600
Utilities Expense 5,900
Utilities Payable $5,900
Wages & Salaries 310,000
Service Revenue 336,000
Notes Payable 109,900
Accounts Payable 109,000
Unearned Revenue 152,000
Common Stock 2,200,000
Retained Earnings 3,364,100
Total $6,276,900 $6,276,900
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Eagle Adventures, Inc. stock is quite cyclical. In a boom economy, the stock is expected to return 30%, 12% in a normal economy, and negative (20%) in a recessionary period. The probability of a recession is 15%. There is a 30% chance of a boom economy. The remainder of the time, the economy will be at normal levels. What is the overall expected value of the returns on Eagle Adventures, Inc. stock
Answer:
Expected Value of the return = 12.6%
Explanation:
The expected rate of return is the weighted average of all the possible returns associated with an investment decision. The returns are weighted using the probability associated with their outcomes.
Expected return = WaRa + Wb+Rb + Wn+Rn
W- weight of the outcome, R - return of the outcome
W- Probability of the expected outcome, R- expected return under a circumstance
The probability of having a normal economy
Note that the sum of the probability of different outcomes should equal to one. Hence, the probability of economy being normal is
= 100% -(15%+30%)= 55%.
Expected Value of the return
(0.3× 30%) + (0.55× 12%) + (0.15 × -20%) =0.126
=0.126 × 100
= 12.6 %
Expected Value of the return = 12.6%
Marshall Grocery Delivery Service reports the following information: Rate per hour of direct labor is: Labor rate per hour $ 20 Rate per hour of direct labor $ 25.80 Materials markup 23 % Target profit margin 20 % The materials markup for a job that will use 100 labor hours and $2,000 of materials is:
Answer:
$460
Explanation:
The following information was reported from Marshall Grocery delivery service report
Labor rate per hour= $20
Rate per hour= $25.80
Materials markup= 23%
Target profit margin= 20%
The material markup for a job that will use 100 labor hours and $2,000 of materials is calculated as follows
Materials markup= Materials × percentage
= $2,000×23/100
= $2,000×0.23
= $460
Hence the materials markup is $460
Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?
Answer:
$3.00
Explanation:
Calaculation of the approximate overhead cost per unit of Product A under activity-based costing:
The first step is to calculate for the Activity 1 allocated to Product A line which is :
$87,000 × 3,000/5,800
=$261,000,000/5,800
=$45,000
The second step is to calaculate for Activity 2 allocated to Product A line which is :
$62,000 × 4,500/10,000
$279,000,000/10,000
=$27,900
The third step is to calculate for Activity 3 allocated to Product A line which is :
$93,000 × 2,500/7,750
=$232,500,000/7,750
=$30,000
The total overhead allocated to Product A
$45,000+$30,000+$27,900
= $102,900
Overhead per unit of Product A: $102,900/Annual production of 34,300 units
= $3.00
Therefore the approximate overhead cost per unit of Product A under activity-based costing will be $3.00
A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the store $100 and the company has an annual holding cost of 25 percent.The fixed cost of a replenishment order (including transportation) is $100. The store currently places a replenishment order every month for 500 jackets. What is the annual holding and ordering cost? On average, how long does a jacket spend in inventory? If the retail store wants to minimize ordering and holding cost, what order size do you recommend? How much would the optimal order reduce holding and ordering cost relative to the current policy?
Answer:
1) What is the annual holding and ordering cost?
annual ordering cost = $100 x 12 = $1,200
annual holding cost = ($100 x 25%) x [500 x 1/2(average inventory)] = $6,250
total $7,450
2) On average, how long does a jacket spend in inventory?
= 30 days / 2 = 15 days
3) If the retail store wants to minimize ordering and holding cost, what order size do you recommend?
economic order quantity (EOQ) = √[(2 x annual demand x order cost) / annual holding cost per unit]
EOQ = √[(2 x 6,000 x 100) / 25] = √48,000 = 219.09 units ≈ 219 units
4) How much would the optimal order reduce holding and ordering cost relative to the current policy?
EOQ = 219
total number of orders = 6,000 / 219 = 27.4 per year
average inventory = 219 / 2 = 109.5 units
annual ordering cost = $100 x 27.4 = $2,740
annual holding cost = ($100 x 25%) x 109.5 = $2,737.50
total $5,477.50
annual savings = $7,450 - $5,477.50 = $1,972.50
Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)
Suppose the interest rate is 7 percent.
Using the rule of 70, the value of Bond A is approximately_______ , and the value of Bond B is approximately_______ .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately_________ , and the value of Bond B is approximately________ . Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a_______ percentage than Bond B's value. The value of a bond__________ when the interest rate increases, and bonds with a longer time to maturity are _________sensitive to changes in the interest rate.
Answer:
To find the value of bond, let's use the formula:
Value of bond = price of bond / (1 + interest rate)ⁿ
Here n represents number of years.
At 7% interest rate:
Value of bond A = [tex]\frac{8000}{(1+0.07)^2^0} = 2067.35[/tex]
Value of bond B = [tex]\frac{8000}{(1+0.07)^1^0} = 4066.79[/tex]
At 14% interest rate:
Value of bond A = [tex] = \frac{8000}{(1+0.14)^20} = 582.09 [/tex]
Value of bond B = [tex] = \frac{8000}{(1+0.14)^10} = 2157.95 [/tex]
The difference between bond A at 7% and 14%:
$582.09 - $2067.35 = -$1485.26
The difference between bond B at 7% and 14%:
$2157.95 - $4066.79 = -$1908.84
% decrease between bond A and B:
[tex] \frac{1908.84 - 1485.26}{1908.84} * 100 = 22.19 [/tex]
Therefore, from the above calculations, we have the following:
Suppose the interest rate is 7%, Using the rule of 70, the value of Bond A is approximately $2067.35, and the value of Bond B is approximately $4066.79 .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately $528.09 , and the value of Bond B is approximately $2157.95 .
Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a 22.19 percentage than Bond B's value.
The value of a bond decreases when the interest rate increases, and bonds with a longer time to maturity are more sensitive to changes in the interest rate.
The standard deviation from investing in the asset is: (Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Here is the complete question.
State of the Economy Probability of Percentage Returns
the States
Economic recession 25% 5%
Moderate economic growth 55% 10%
Strong economic growth 20% 13%
The standard deviation from investing in the asset is: (Round to the nearest hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Answer:
standard deviation from investing in the asset is: 2.76
Explanation:
From the information given above; the main task to do is to calculate for the standard deviation from investing in the asset ,but in order to do that; we must first determine the expected return value and the variance.
The expected return can either be the profit or loss the investor predict to get after investing on an instrument. It can be determined by multiplying the potential outcomes by the chances of them occurring and then totaling these results.
Here;
the potential outcome = Probability of the States
chances of them occurring = Percentage Returns
∴
Expected return = (0.25 × 5%) + (0.55 × 10%) + (0.20 × 13%)
Expected return = (1.25 + 5.5 + 2.6)%
Expected return = 9.35%
Variance = 0.25 × (5% - 9.35%)² + 0.55 × (10% - 9.35%)² + 0.20 × (13% - 9.35%)²
Variance = 0.25 ( -4.35%)² + 0.55 (0.3575%)² + 0.20 (3.65%)²
Variance = 0.0473 + 0.0023 + 0.0266
Variance = 0.0763
Finally; the standard deviation = [tex]\sqrt{variance}[/tex]
standard deviation = [tex]\sqrt {0.0763[/tex]
standard deviation = 0.276
To the nearest hundredth percent and by answering in the percent format without including the % sign ; we have
standard deviation = 2.76
4.Swan Manufacturing is approached by a customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers: Direct materials$1,825 Direct labor900 Variable manufacturing support1,300 Fixed manufacturing support3,000 Total manufacturing costs$7,025.00 Markup (50%)3,512.50 Targeted selling price$ 10,537.50 Swan Manufacturing has excess capacity. Required: a.What is the full cost of the product per unit if the marketing costs is $3,000
Answer:
the full cost of the product per unit if the marketing costs is $3,000 is $7,025.
Explanation:
The cost of the special order will exclude the Fixed manufacturing support as these are common whether the order is accepted or not thus irrelevant. Remember to include the marketing costs as an additional cost.
Calculation of cost of the product :
Direct materials $1,825
Direct labor $900
Variable manufacturing support $1,300
marketing costs is $3,000
Total $7,025
Conclusion :
Thus, the full cost of the product per unit if the marketing costs is $3,000 is $7,025.
Globalization has been driven by five major factors: political, technological, market, cost, and competitive. Business has fueled these trends and has been the beneficiary of these trends. Understanding these trends helps businesses develop strategies and tactics to accelerate these trends. Understanding globalization trends helps businesses identify opportunities and threats in their environment. Understanding these trends will also make the changes much more manageable. International businesses have greater flexibility, more options, and a broader scope to consider globalization of production and globalization of markets.For each driving force listed, click and drag the correct description from the left and place it as a description or implication for business on the right. Driving Force Description Implication for Business Preferential trading Growth in services privatization of industriesCompetitive drivers Exporting or producing New opportunities and new markets Political drivers fgoods Emergence of global sold Lower cost Cost drivers Explosive growth of high-power, low-cost computing opportunities for trade and investment Technological drivers Explosive growth in Intense competition 6 international business in world markets Market drivers
Answer:
Competitive Drivers
Description
Explosive growth in international business
Implication for Business
Intense competition in world markets
Globalization has led to an explosive growth in international.business which has led to increased competition amongst companies because they now have to compete on a global scale against numerous companies in various locales.
Political Drivers
Description
Preferential trading arrangements and privatization of industries
Implications for Business
Increased opportunities for trade and investment
Some Countries offer great trading agreements this enabling companies to trade in other countries. This opportunity means that there are increased opportunities for trade by companies in the countries involved in the agreement.
Cost Drivers
Description
Exporting or producing Overseas
Implications for Business
Lower Cost of Goods sold
Globalization has enabled companies to be able to produce in cheaper markets for labor such as in Asia and Africa. This has led to a lower cost of goods sold and therefore higher profits.
Technological Drivers
Description
Explosive growth of high-power, low-cost computing
Implications for Business
Growth in Services.
Driving Globalization is an increased use of technology by human beings. The world is now connected by mere seconds which has enabled companies to derived clients all over the world this enabling them to offer more services.
Market Drivers
Description
Emergence of Global Customers
Implications for Business
New Opportunities and New Markets.
Another factor driving Globalization is the availability of new markets to sell their goods in in different territories. Companies can therefore have an increased demand base which will mean more Profitability.
Globalization has been driven by many factors. It has increased trading with other countries.
Globalization CompetitiveDrivers Globalization has led to growth in the international market.
The businesses led to competition amongst companies as they compete on a global.
Political Drivers Some Countries offer trading deals that allow companies to trade with others.
It suggests that there are increasing possibilities for trade by companies in the countries involved in the agreement.
Cost Drivers Globalization has helped companies produce products that help labour in Asia and Africa at a low cost.
This has led to a lower cost of goods sold with higher profits.
Technological Drivers Driving Globalization is an increase in the use of technology by humans.
People are connected by the internet, which has enabled companies to derive clients with more services.
Market Drivers Here globalization is available in new markets to trade goods in different regions.
Companies can have an increased demand based which will mean more Profitability.
Find out more information about Globalization here:
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Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds that pay 5.6 percent interest. Jackson is a single taxpayer who earns $47,500 annually. Assume that the city of Mitchell bonds and the Sundial, Inc. bonds have similar risk. What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for 2019
Answer: 4.37%
Explanation:
As interest is tax deductible, the Sundial Interest needs to be adjusted for tax to find out the true return.
Jackson as a single tax payer earning $47,500 in 2019 has a tax rate of 22% according to the IRS Tax bracket for that year.
That means that the interest that true interest that Sundial is offering him is,
= 5.6 * ( 1 - tax rate)
= 5.6 * ( 1 - 0.22)
= 5.6 * 0.78
= 0.04368
= 4.37%
To make Jackson indifferent with the same amount of risk, the city of Mitchell would have to offer him the same interest that Sundial is offering net of tax which is 4.37%.
Use the starting balance sheet, income statement, and the list of changes to answer the question. Gulf Shipping Company Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 38,000 Liabilities 22,000 Other Assets 27,000 Equity 43,000 Total Assets 65,000 Total Liabilities & Equity 65,000 Gulf Shipping Company Income Statement January 1 to March 31, 2020 (amounts in thousands) Revenue 5,100 Expenses 2,800 Net Income 2,300 Between January 1 and March 31, 2020: 1. Cash decreases by $100,000 2. Other Assets do not change 3. Paid-In Capital does not change 4. Dividends paid of $400,000 What is the value for Liabilities on March 31, 2020?
Answer:
the value for Liabilities on March 31, 2020 is $22,000
Explanation:
Liabilities are current obligations of the entity that arose as a result of past events, the settlement of which will results in the outflow of cash from the entity.
To calculate the value for Liabilities on March 31, 2020, make adjustments to the liability balance that exists at the start of the year with movement that qualify as liabilities as defined above.
Opening balance as at 1 January 2020 = $22,000
Movements in liabilities = $0
Balance as at March 31, 2020 = $22,000
Conclusion :
The liabilities value on March 31, 2020 remains at $22,000
The following inventory balances relate to Lequin Manufacturing Corporation at the beginning and end of the year: Beginning Ending Raw materials $14,000 $19,000 Work in process $31,000 $7,000 Finished goods $25,000 $23,000 Lequin's total manufacturing cost was $543,000. What was Lequin's cost of goods sold?
Answer:
Cost of goods sold = $564,000
Explanation:
The cost of goods sold would be determined as follows:
$
Opening inventory
Raw material = 14,000
Work in progress 31,000
Manufacturing cost 543,000
588,000
Add open inventory of Finished goods 25,000
Less Closing inventory
raw material ( 19,000)
Work in progress ( 7,000)
Total cost of goods available for sale 587,000
Less closing inventory of finished goods 23,000
Cost of goods sold 564,000
Note that the opening inventory of raw material and work in progress would increase the manufacturing cost while their respective closing inventory represent cost incurred on production during the period on inventories not yet completed
The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 90,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:
Direct materials $22.80
Direct labor $18.60
Variable manufacturing overhead $14.20
Fixed manufacturing overhead $16.00
Variable selling expense $12.80
Fixed selling expense $8.40
The regular selling price of one unit of Product C is $100.80. A special order has been received by Melrose from Moore Corporation to purchase 3,500 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $6,300 and will have no use after the special order is filled. Assume that direct labor is a variable cost.
Assume that Melrose expects to sell 68,000 units of Product C to regular customers next year. At what selling price for the 3,500 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?
a. $59.10
b. $60.60
c. $81.10
d. $82.60
Answer:
Indifferent selling price =$67 per units
Explanation:
The selling at which Mel rose would be economically be indifferent between accepting and rejecting the special order from Moore is that that equates the relevant cost of making to the revenue from t
Relevant variable cost making
= 22.80 + 18.60 + 14.20 + (75%×12.80) = $65.2
$
Variable cost of special order (= $65.2 × 3,500)= 228,200
Cost of machine 6,300
Total relevant cost of special order 234,500
The price at which Melrose would be indifferent
= total relevant cost/ number of units
$234,500/3500 units
=$67 per units
Barry, a solvent individual but a recovering alcoholic, embezzled $6,000 from his employer. In the same year that he embezzled the funds, his employer discovered the theft. His employer did not fire him and told him he did not have to repay the $6,000 if he would attend Alcoholics Anonymous. Barry met the conditions and his employer canceled the debt.
A. Barry did not realize any income because his employer made a gift to him.
B. Barry must include $6,000 in gross income from discharge of indebtedness.
C. Barry must include $6,000 in gross income under the tax benefit rule.
D. Barry may exclude the $6,000 from gross income because the debt never existed.
E. None of these.
Answer: Barry must include $6,000 in gross income from discharge of indebtedness
Explanation:
Feom the question above, we are told that Barry embezzled $6,000 from his employer and that even though his employer discovered the theft, the employ did not fire him and told him that he did not have to repay the $6,000 if he attend Alcoholics Anonymous. Barry met the conditions and the employer canceled the debt.
In this case, Barry will have to include the $6,000 he stole in gross income from discharge of indebtedness. The gross income has to do with the sum of the wages, profits, salaries, rents, interest payments, and every other earnings, before the deductions of taxes or other deductions. Since Barry stole the money and.he.has been forgiven, the $6,000 has to be included in the gross income from discharge of indebtedness.
Anson Jackson Court Company (AJC) The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00. Refer to the data for the Anson Jackson Court Company (AJC). Now assume that AJC is considering changing from its original capital structure to a new capital structure with 50% debt and 50% equity. If it makes this change, its resulting market value would be $820,000. What would be its new stock price per share?
Answer:
The new stock price per share would be $62
Explanation:
In order to calculate the new stock price per share we would have to calculate first the value of the firm as follows:
value of the firm=value of equity+value of debt
value of the firm=(60*10,000)+$200,000
value of the firm=$800,000
If the company makes 50% debt and 50% equity, the market value will increase to $820,000 that is value of equity=$820,000-$200,000=$620,000
Therefore, new stock price per share will be=$620,000/10,000
new stock price per share=$62
You have $6,600 to deposit. Regency Bank offers 12 percent per year compounded monthly (1.0 percent per month), while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 17 years at each bank
Answer:
Instructions are below.
Explanation:
Giving the following information:
Deposit= $6,600
Regency Bank:
12 percent per year compounded monthly (1.0 percent per month)
King Bank:
12 percent but will only compound annually.
Number of years= 17
To calculate the final value, we need to use the following formula for each bank:
FV= PV*(1+i)^n
Regency Bank:
n=17*12= 204
FV= 6,600*(1.01^204)
FV= $50,246.3
King Bank:
FV= 6,600*(1.12^17)
FV= $45,315.87
Suppose the U.S. government cuts back on government spending and increases taxes in an effort to reduce the budget deficit. What would be the effect of these changes on the U.S. balance of payments?
a. There would be no change because the balance of payments always equals zero.
b. There would be an increase in the current account and an increase in the capital account.
c. There would be a decrease in the current account and a decrease in the capital account.
d. There would be a decrease in the current account and an increase in the capital account.
d. There would be an increase in the current account and a decrease in the capital account.
Answer:
d. There would be a decrease in the current account and an increase in the capital account.
Explanation:
The balance of payment in accounting typically comprises of capital account and current account, it is used for the recording of business transactions between two countries. Capital accounts are used to record any trade between two countries relating to financial assets and liabilities.
The current account is used to record trades relating to import and export of goods and services in a country.
Hence, if the U.S. government cuts back on government spending and increases taxes in an effort to reduce the budget deficit. The effect of these changes on the U.S. balance of payments is that there would be a decrease in the current account because it has no effect on the value of assets and liabilities, thereby affecting the export and import of goods and services.
Also, there would be an increase in the capital account due to the fact that the government tends to borrow more and seeks foreign investors.
Sheridan Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 485 units that cost $66 each. During the month, the company made two purchases: 725 units at $69 each and 364 units at $71 each. Sheridan Company also sold 1198 units during the month. Using the average cost method, what is the amount of ending inventory? (Round average cost per unit to 2 decimal places, e.g. 21.48.)
Answer:
Value of closing inventory = $25771.04
Explanation:
To calculate the value of ending inventory under a periodic average cost method, we will calculate the average price per unit of inventory at the end of the month. To calculate the average price per unit, we simply divide the total cost of the inventory by the total number of units for the month.
Average cost per unit = Total cost of all units for the month / Total units available for the month
Total cost of all units:
Beginning inventory (485 * 66) 32010
Purchase 1 (725 * 69) 50025
Purchase 2 (364 * 71) 25844
Total 107879
Total Units
Beginning Inventory 485
Purchase 1 725
Purchase 2 364
Total 1574
Average cost per unit = 107879 / 1574
Average cost per unit = $68.54
Units of closing inventory = 1574 - 1198 = 376 units
Value of closing inventory = 376 * 68.54
Value of closing inventory = $25771.04
Big data analytics programs (analyzing massive data sets to make decisions) use gigantic computing power to quantify trends that would be beyond the grasp of human observers. As this use of this quantitative analysis increases, do you think it may decrease the "humanity of production" in organizations? Why?
Answer:
It will not decrease the humanity of production.
Explanation:
Big data analytics is useful for unraveling hidden patterns and correlations. Big data analytics is sometimes linked to be a direct descendant of Frederick Winslow Taylor’s scientific management and recently it is the most recent iteration of the quantitative approach to management.
Big data is used in management in activities that includes humans or individuals therefore it will not reduce the humanity of production in organizations.
As an employee in the Lottery Commission, your job is to design a new prize. Your idea is to create two grand prize choices: (1) receiving $50,000 at the end of each year beginning in one year for 20 consecutive years, or (2) receiving $500,000 today followed by a one-time payment at the end of 20 years. Using an interest rate of 6%, which of the following comes closest to the amount prize (2) needs to pay at the end of year 20 in order that both prizes to have the same present value?
a. $ 326,649
b. $ 440,463
c. $ 114,932
d. $ 393,342
e. $ 235,712
Answer:
The correct option is $235,712,option E
Explanation:
The present value of prize(1) can be computed by using the excel pv formula as shown below:
=-pv(rate,nper,pmt,fv)
rate is interest rate of 6%
nper is the number of years payment would be made which is 20
pmt is the amount of money received per year which is $50,000
fv is the total future worth of the prize (1) which is unknown
=-pv(6%,20,50000,0)
=$573,496.06
The difference between present value of prize(1) $573,496.06 and $500,000 receivable from prize (2) today is $73,496.06
The difference is today's worth, its future worth can be computed thus:
FV=PV*(1+r)^n
PV is $73,496.06
r is 6%
n is 20 years
FV=$73,496.06*(1+6%)^20 =$ 235,711.82
The amount that prize (2) needs to pay after 20 years so that both prizes bear the same present value is closer to Option B. $440,463.
Data and Calculations:
N (# of periods) = 20 years
I/Y (Interest per year) = 6%
PMT (Periodic Payment) = $50,000
FV (Future Value) = $0
Results:
Present Value (PV) = $573,496.06
Sum of all periodic payments = $1,000,000.00
Total Interest = $426,503.94
Thus, the amount that prize (2) needs to pay after 20 years so that both prizes bear the same present value is closer to Option B.
Learn more about the present value of cash flows here: https://brainly.com/question/24674907
lyssa and Crystal are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Alyssa takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Crystal takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza. Alyssa's opportunity cost of brewing a gallon of root beer is__________ , and Crystal's opportunity cost of brewing a gallon of root beer is__________ , has an absolute advantage in brewing root beer, and has a comparative advantage in brewing root beer. If Alyssa and Crystal trade foods with each other, will trade away pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is of root beer, and the lowest price that makes both roommates better off is of root beer per pizza.
Answer:
a. 1.5 pizza
b. 1.39 pizza
c. Alyssa has an absolute advantage in brewing beer
d. Crystal has a comparative advantage in brewing beer
e. Crystal will easily trade away pizza for root beer
f. there's no limit to the highest price
g. lowest price is 0.719 beer root/pizza
Explanation:
Alyssa takes 3 hrs to brew a gallon of root beers and 2 hrs to make a pizza
Crystal takes 7 hrs to brew a gallon of root beer and 5 hrs to make a pizza
Alyssa make 1 gallon/3 hrs = 0.33 gallons/hr of beer, and the same way makes 0.5 pizza/hr
Crystal makes 0.143 gallon/hr of beer, and 0.2 pizza/hr
for Alyssa, 0.33 gallons/hr = 0.5 pizza/hr, therefore
1 gallon of beer = 0.5/0.33 = 1.51 pizza
for crystal, 1 gallon of beer = 0.2/0.143 = 1.39 pizza
price of pizza:
Alyssa = 0.662 root beer/pizza
Crystal = 0.719 root beer/pizza
There are many perfumes on the market, but Demeter, a superior brand of perfume, has memorable scents that leads to emotional ties. Which element of the marketing plan is being considered when the marketing manager decided initially to market the perfume in a limited number of very exclusive specialty stores?
Answer:
Place
Explanation:
The four P's of marketing is a number of tactics employed in a marketing plan to achieve better sales of a product. These four P's include; Price, Place, Promotion, and Product. The place factor takes note of the location where the target customers are most likely to be reached. To achieve better sales of a product, it is very important that the right location is chosen so that consumers who are interested in it can access it easily. For example, it would make no sense to sell grocery products in a boutique. That is not where the target customers are.
So, when the marketing manager of Demeter Perfumes decided to market the perfume in a limited number of very exclusive specialty stores, it is because that place is where the target market (most likely, high income earners), can be found easily.
If he goes to college, he will spend $22,000 on tuition, $11,000 on room and board, and $1,700 on books. If he does not go to college, he will earn $12,000 working in a store and spend $6,000 on room and board. Taio's cost of going to college is
Answer:
$40,700
Explanation:
To determine Taio's cost of going to college you need to find the economic cost that involves all the costs that you need to cover to receive a benefit and the opportunity costs that refer to what you would have received if you had chosen a different alternative. According to this, Taio's cost is equal to all the acounting costs related to going to college plus the opportunity costs that are the benefits lost from the other option which was not going to college.
Accounting costs= $22,000+$11,000+$1,700= $34,700
Opportunity costs= $12,000-$6,000= $6,000
Taio's cost of going to college is equal to the acount costs plus the opportunity costs:
$34,700+$6,000= $40,700
Hot and Cold has annual sales of $847,000, annual depreciation of $47,000, and net working capital of $43,000. The tax rate is 21 percent and the profit margin is 7.3 percent. The firm has no interest expense. What is the amount of the operating cash flow
Answer:
The amount of the operating cash flow is $108,831
Explanation:
In this question, we are tasked with calculating the amount of the operating cash flow.
Firstly, we calculate the net income.
Mathematically, net income = Sales × % profit margin
From the question, sales = $847,000
% profit margin = 7.3% = 7.3/100 = 0.073
Net income = $847,000 × 0.073 = $61,831
Finally, Operating cash flow = Net income + Depreciation
From the question, depreciation = $47,000
Plugging this alongside the net income,
Operating cash flow = $61,831 + $47,000 = $108,831
Zombie Corp. has a profit margin of 5.1 percent, a total asset turnover of 1.95, and ROE of 16.15 percent.
What is this firm's equity multiplier?
What is this firm's debt-equity ratio?
Answer:
This firm's equity multiplier is 1.6239
This firm's debt-equity ratio is 0.6239
Explanation:
According to the given data we have the following:
Profit Margin (PM) = 5.10%
That is, Net Profit/Sales = 5.10% = 0.051
Total Assets Turnover (TAT) = 1.95
That is, Sales/Total Assets = 1.95
Return on Equity (ROE) = 16.15%
That is, Net Profit/Total Equity = 16.15% = 0.1615
In order to calculate this firm's equity multiplier we would have to use the following formula:
Equity Multiplier (EM) = Total Assets / Total Equity
=(total assets/sales)*(sales/total equity)
=(total assets/sales)*(sales/net profit)*(net profit/total equity)
=(1/T AT)*(1/PM)*(ROE)
=(1/1.95)*(1/0.051)*(0.1615)
=1.6239
This firm's equity multiplier is 1.6239
In order to calculate this this firm's debt-equity ratio we would have to use the following formula:
Debt Equity Ratio = Debt/Equity
=(total assets- total equity)/(total equity)
=(total assets/total equity)-(total equity/total equity)
= equity multiplier-1
=1.6239-1
=0.6239
This firm's debt-equity ratio is 0.6239
Break-Even Sales Currently, the unit selling price of a product is $370, the unit variable cost is $300, and the total fixed costs are $1,001,000. A proposal is being evaluated to increase the unit selling price to $410. a. Compute the current break-even sales (units). units b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. units
Answer:
a. 14,300 units
b. 9,100 units
Explanation:
a. For computation of current break-even sales (units) first we will find out the contribution margin per unit which is shown below:-
Contribution margin per unit = Selling price per unit - Variable cost
= $370 - $300
= $70
Current break-even sales (units) = Fixed cost ÷ Contribution margin per unit
= $1,001,000 ÷ $70
= 14,300 units
b. For computation of anticipated break-even sales (units) first we will find out the contribution margin per unit which is shown below:-
Contribution margin per unit = Selling price per unit - Variable cost
= $410 - $300
= $110
Anticipated break-even sales (units) = Fixed cost ÷ Contribution margin per unit
= $1,001,000 ÷ $110
= 9,100 units
So, we have applied the above formula.