Answer:
The Absolute Advantage Theory assumed that only bilateral trade could take place between nations and only in two commodities that are to be exchanged.
Explanation:
In economics, the principle of absolute advantage refers to the ability of a party (an individual, a firm, or a country) to produce more of a good or service than competitors while using the same amount of resources.
Gabbe Industries is a division of a major corporation. Last year the division had total sales of $23,826,400, net operating income of $2,835,342, and average operating assets of $9,164,000. The company's minimum required rate of return is 19%.
Answer:
a. Division margin:
= Net operating income / Total sales
= 2,835,342 / 23,826,400
= 11.9%
b. Division turnover:
= Sales / Total assets
= 23,826,400 / 9,164,000
= 2.6 times
c. Division ROI:
= Net operating income / Total assets
= 2,835,342 / 9,164,000
= 30.94%
($ millions) Beverage Division Cheese Division Invested assets, beginning $ 2,669 $ 4,462 Invested assets, ending 2,597 4,404 Sales 2,685 3,929 Operating income 353 638 rev: 11_25_2020_QC_CS-242542 1. Compute return on investment. 2. Compute profit margin. 3. Compute investment turnover for the year
Answer:
Beverage Division Cheese Division
1. Return on investment 12.89% 18.25%
2. Profit margin 13.15% 16.24%
3. Investment turnover 1.02 0.89
Explanation:
a) Data and Calculations:
Beverage Division Cheese Division
Invested assets, beginning $ 2,669 $ 4,462
Invested assets, ending 2,597 4,404
Average invested assets $ 2,633 $ 4,433
Sales 2,685 3,929
Operating income 353 638
Return on investment 12.89% 18.25%
Profit margin 13.15% 16.24%
Investment turnover 1.02 0.89
Return on investment = Profit margin/Investment turnover
Beverage = 13.15%/1.02 = 12.89%
Cheese = 16.24%/0.89 = 18.25%
Profit margin = Operating income/Sales * 100
Beverage = $353/2,685 * 100 = 13.15%
Cheese = $638/3,929 * 100 = 16.24%
Investment turnover = Sales/Average invested assets
Beverage = $2,685/$2,633 = 1.02
Cheese = $3,929/$4,433 = 0.89
Investment Center Sales Income Average Invested Assets Electronics $ 40,500,000 $ 2,916,000 $ 16,200,000 Sporting goods 20,740,000 2,074,000 12,200,000 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company
Answer and Explanation:
The computation of the return on investment is shown below;
We know that
Return on Investment is
= (Net Income ÷ Average Operating Assets] × 100
For Electronics
= [$29,16,000 ÷ 162,00,000] × 100
= 18%
And,
For Sporting goods
= [$20,74,000 ÷ 122,00,000] × 100
= 17%
So here the electronics department should be selected as it has high return on investment
If a company sells its smart phones for $400 and the phones have a COGS of $250, how many additional phones would the company have to sell if it decided to spend an extra $150,000 on advertising to promote the phones
Answer:
Units to be sold= 1,000
Explanation:
Giving the following information:
Selling price= $400
COGS= $250
Increase in costs= $150,000
To calculate the number of units to be sold to cover the incremental costs, we need to use the following formula:
Units to be sold= increase in costs/ contribution margin per unit
Units to be sold= 150,000 / (400 - 250)
Units to be sold= 1,000
Assume you deposit $5,000 at the end of each year into an account paying 9.5 percent interest. a. How much money will you have in the account in 19 years
Answer: $242,567.27
Explanation:
The $5,000 is an annuity as it is being paid every year and is a constant amount.
The value in 19 years is the future value of this annuity:
Future value of annuity = Annuity * ( ( 1 + rate) ^ number of years - 1) / rate
= 5,000 * ( ( 1 + 9.5%)¹⁹ - 1) / 9.5%
= $242,567.27
Penelope withdraws $4,115.23 at the end of a five-year investment yielding 4% interest, compounded annually. How much did Penelope originally deposit
Answer:
$3,382.42
Explanation:
The amount originally deposited by Penelope (PV) can be determined using a Financial calculator as follows :
FV = $4,115.23
PMT = $0
N = 5
I = 4 %
P/YR = 1
PV = ?
The PV is $3,382.42
thus,
Penelope originally deposited $3,382.42
Refer to Exhibit 26-5. Assume the firm is a factor price taker and that the price of a unit of labor is constant at $1,200. The firm should hire __________ of labor.
Answer: 3 units of labor
Explanation:
The marginal revenue product will be:
- 1 labor unit
Marginal product = 500
Marginal revenue product = 500 × 5 = 2500
- 2 labor unit
Marginal product = 400
Marginal revenue product = 400 × 5 = 2000
- 3 labor unit
Marginal product = 250
Marginal revenue product = 250 × 5 = 1250
- 4 labor unit
Marginal product = 200
Marginal revenue product = 200 × 5 = 1000
- 5 labor unit
Marginal product = 200
Marginal revenue product = 200 × 5 = 1000
Therefore, till the third unit of labor, we can infer that the marginal revenue product is more than the marginal revenue cost. The 4th and 5th unit of labor will become costly to hire more labor.
Stock Valuation Suppose you know that a company's stock currently sells for $64 per share and the required return on the stock is 13 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
Answer:
$3.85
Explanation:
Calculation to determine the current dividend per share
First step is to calculate the Dividend yield using this formula
Dividend yield=Dividend for next period/Current price
Let plug in the formula
Dividend yield=(13%/2)
Dividend yield=6.5%
Second step is to calculate the Dividend for next period
Dividend for next period=($63*6.5%)
Dividend for next period=$4.095
Now let determine the Current dividend using this formula
Current dividend=Dividend for next period*Present value of discounting factor(rate%,time period)
Let plug in the formula
Current dividend=$4.095/1+.065
Current dividend=$4.095/1.065
Current dividend=$3.85(Approx).
Therefore the current dividend per share is $3.85
New educational study has proven that the practice of writing, erasing, and rewriting improves students' ability to process information, leading parents to steer away from pen use in favor of pencils.
a. True
b. False
The following account balances are taken from the December 31, 2018, financial statements of ABZ Advertising Company. The company uses accrual basis accounting.
Advertising Revenue $46,982
Cash 41,516
Accounts Receivable 7,296
Interest Expense 2,299
Accounts Payable 5,000
Operating Expenses 37,460
Deferred Revenue 1178
Equipment 18,648
Income Tax Expense 2,326
The following activities occurred in 2019:
1. Performed advertising services on account, $55,000.
2. Received cash payments from customers on account, $10,400.
3. Received deposits from customers for advertising services to be performed in 2020, $2,500.
4. Made payments to suppliers on account, $7,000.
5. Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
Required:
What is the amount of revenue that will be reported on the income statement for the year ended December 31, 2019?
Answer:
the amount of the revenue that should be recorded is $51,896
Explanation:
The computation of the amount of the revenue that should be recorded is shown below:
= Opening balance of account receivable + service revenue balance on the account - cash payment
= $7,296 + $55,000 - $10,400
= $51,896
Hence, the amount of the revenue that should be recorded is $51,896
On its balance sheet, Walgreen Co. reports treasury stock at cost of $4,114 million. The company has a total of 1,100,000,000 shares issued and 950,000,000 shares outstanding. What average price did Walgreen pay for treasury shares?
a. $3.15.b. $3.29.c. $3.03.d. $38.1.
Answer:
$2.74
Explanation:
Calculation to determine What average price did Walgreen pay for treasury shares
Price per share =total treasury shares at cost/treasury shares.
Price per share=$4,114 million / (1,100,000,000 – 950,000,000)
Price per share=$4,114 million/
= $2.74 per share.
Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800 and investment of $3,000. GDP equals:_______.A. $24,450B. $11,550C. $15,300D. $20,700
Answer:
C. $15,300
Explanation:
Calculation to determine what GDP equals:
Using this formula
GDP = Consumption + Investment spending + Government Spending + Net Export
Where,
Net Export = Export - Import
Let plug in the formula
GDP=$9,000 + $3,000 + $3,500 + ($2500 - $2700)
GDP= $15,300
Therefore GDP equals:$15,300
Alliances are often used to pursue business-level goals, but they may be managed at the corporate level. Explain why this portfolio approach to alliance management would make sense.
Answer:
mainly because of information
Explanation:
This approach makes sense mainly because of information. Business-level goals are all about performance and profit. Corporate is made up of individuals that are invested in the company itself. They have all the information on what the company wants to accomplish, long-term strategies being used, available resources, etc. Most of this information is closed off to the rest of the company and only available to those in Corporate. This information is what leads to informed decisions which allow for the best, most efficient, and most profitable choices to be made.
On January 1, James Industries leased equipment to a customer for a four-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $700,000 and has an expected useful life of six years. Its normal sales price is $700,000. The residual value after four years is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 5%. Calculate the amount of the annual lease payments.
Answer:
$174,207.19
Explanation:
Amount to be recovered (Fair value) = $700,000.....A
PV of residual value = $100,000 * PVIF of $1(5%, 4) = $100,000 * 0.82270 = $82,270.........B
Amount to be recovered through periodic lease payments = A - B = $700,000 - $82,270 = $617,730
Annual lease payment = Amount to be recovered through periodic lease payments / PV of ordinary annuity of $1(5%, 4)
Annual lease payment = $617,730 / 3.54595
Annual lease payment = $174207.194123
Annual lease payment = $174,207.19
So, the amount of the annual lease payments is $174,207.19.
A cleaning product company is having trouble with the pH control of one of their products. The product should be slightly basic but the pH is too high. What could the company try to correct the pH of the product
Answer:
sodium hydroxide to raise and acidic solutions to drop ph
Explanation:
how to lower and make highee
The amount due on the maturity date of a $10,900, 60-day 6%, note receivable is: (Use 360 days a year.)
Answer:
$11,009
Explanation:
Calculation to determine The amount due on the maturity date
Amount due =10900 x .06 x 1/6 = $109 + $ 10900
Amount due=$11,009
Therefore The amount due on the maturity date is $11,009
Blake Company purchased two identical inventory items. The item purchased first cost $34.00, and the item purchased second cost $35.00. Blake sold one of the items for $64.00. Which of the following statements is true?
A. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.
B. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.
C. Ending inventory will be lower if Blake uses weighted average than if FIFO were used.
D. Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used.
Answer:
c
Explanation:
LIFO means last in first out. It means that it is the last purchased inventory that is the first to be sold.
FIFO means first in, first out. It means that it is the first purchased inventory that is the first to be sold
Weighted average is the average cost of the inventories bought over a period
If FIFO is used, ending inventory would be $35.
If weighted average is used , ending inventory = (34 +35) / 2 = $34.50
Thus, ending inventory will be lower if Blake uses weighted average than if FIFO were used
Gross margin = gross profit / revenue
If FIFO was used . gross margin = (64 - 34) / 64 = 0.469
If LIFO was used . gross margin = (64 - 35) / 64 = 0.453
Gross margin will be lower if Blake uses LIFO than it would be if FIFO were used.
Fowler, Inc., just paid a dividend of $2.60 per share on its stock. The dividends are expected to grow at a constant rate of 5.75 percent per year, indefinitely. Assume investors require a return of 12 percent on this stock.
a. What is the current price?
b. What will the price be in four years and in sixteen years?
Answer:
a. Current price = $43.99
b. We have:
Price in four years = $52.03
Price in sixteen years = $101.76
Explanation:
a. What is the current price?
Using the Gordon Growth Model formula, we have:
Current price = (Dividend just paid * (100% + Dividend growth rate)) / (Rate of return – Dividend growth rate) = ($2.60 * (100% + 5.75%)) / (12% - 5.75%) = $43.99
b. What will the price be in four years and in sixteen years?
Using the Gordon Growth Model formula with an adjustment for number of years, we have:
Price in four years = (Dividend just paid * (100% + Dividend growth rate)^Number of years) / (Rate of return – Dividend growth rate) = ($2.60 * (100% + 5.75%)^4) / (12% - 5.75%) = $52.03
Price in sixteen years = (Dividend just paid * (100% + Dividend growth rate)^Number of years) / (Rate of return – Dividend growth rate) = ($2.60 * (100% + 5.75%)^16) / (12% - 5.75%) = $101.76
When one uses the after-tax weighted average cost of capital (WACC) to value a levered firm, the interest tax shield is A) not accounted for by the use of the WACC. B) considered by deducting the interest payment from the cash flows. C) automatically considered because the after-tax cost of debt is included within the WACC formula. D) capitalized by the levered cost of equity.
Answer: C) automatically considered because the after-tax cost of debt is included within the WACC formula.
Explanation:
When calculating the Weighted Average Cost of Capital (WACC) for a levered firm, the interest tax shield is included because the cost of debt used is adjusted for tax as shown below:
= (Weight of debt * Cost of debt( 1 - tax rate) ) + (Weight of equity * cost of equity)
As shown above, the interest tax shield is already implicit in the formula so there is no need to adjust the levered firm for an interest tax shield as this would lead to double-counting.
Deluxe Company expects to pay a dividend of $2 per share at the end of year-1, $3 per share at the end of year-2 and then be sold for $32 per share. If the required rate on the stock is 15%, what is the current value of the stock
Answer:
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MC Qu. 157 West Company estimates that overhead costs... West Company estimates that overhead costs for the next year will be $3,600,000 for indirect labor and $880,000 for factory utilities. The company uses machine hours as its overhead allocation base. Of 125,000 machine hours are planned for this next year, what is the company's plantwide overhead rate
Answer:
$35,84 per machine hour
Explanation:
Plantwide overhead rate = Budgeted overheads ÷ Budgeted Activity
where,
Budgeted overheads = $3,600,000 + $880,000 = $4,480,000
Budgeted Activity = 125,000 machine hours
therefore,
Plantwide overhead rate = $4,480,000 ÷ 125,000
= $35,84 per machine hour
Shawn Incorporated planned to produce 3,000 units of its single product, Megatron, during November. The standard specifications for one unit of Megatron include six pounds of material at $0.30 per pound. Actual production in November was 3,100 units of Megatron. The accountant computed a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, one could conclude that:_________
Answer: The actual cost of materials was less than the standard cost
Explanation:
Net materials cost variance = Favorable materials price variance + Favorable materials quantity variance
= 380 + (-120 unfavorable)
= 380 - 120
= $260 favorable
As the materials cost variance is favorable, it means that the actual cost of materials was less than what was budgeted for it or rather its standard cost.
Mannix Corporation stock currently sells for $80 per share. The market requires a return of 10 percent on the firm's stock. If the company maintains a constant 6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock
Answer: $3.02
Explanation:
The Gordon growth method can help solve this:
Formula is:
Price of stock = (Most recent dividend * (1 + growth rate)) / (required return - growth rate)
80 = ( D * ( 1 + 6%)) / (10% - 6%)
80 = 1.06D / 4%
1.06D = 80 * 4%
D = 3.2 / 1.06
D = $3.02
A 15-year semi-annual coupon bond pays a coupon rate of 7%. The par value of the bond is $1,000. If similar bonds are currently yielding 6%, what is the market value of the bond
Answer:
Bond Price= $1,098.01
Explanation:
Giving the following information:
Coupon= (0.07/2)*1,000= $35
YTM= 0.06/2= 0.03
n= 15*2= 30
Face value= $1,000
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 35*{[1 - (1.03^-30)] / 0.03} + (1,000 / (1.03^30)]
Bond Price= 686.02 + 411.99
Bond Price= $1,098.01
Blitz Corp. had total sales of $3,130,000 last year and has 109,000 shares of stock outstanding. The benchmark PS is 1.66 times. What stock price would you consider appropriate
Answer:
$47.68
Explanation:
Calculation to determine stock price would you consider appropriate
Using this formula
Stock price=(Total sales/Shares of stock outstanding)*Benchmark PS
Let plug to determine
Stock price=($3,130,000/109,000) ×1.66
Stock price=28.72x 1.66
Stock price= $47.68
Therefore the stock price that you would
consider Appropriate is $47.68
In September, Jeanette Company purchased materials costing $34,400 and incurred direct labor cost of $22,100. Manufacturing overhead totaled $58,000 for the month. Information on inventories was as follows: September 1 September 30 Materials $10,300 $9,800 Work in process 6,500 7,400 Finished goods 3,630 2,970 What was the cost of direct materials used in production for the month of September? a. $34,900 b. $33,900 c. $35,300 d. $33,500
Answer:
a. $34,900
Explanation:
The computation of the cost of direct material used is shown below:
= Opening balance of raw material + purchased materials - ending balance of raw material
= $10,300 + $34,400 - $9,800
= $34,900
Hence, the correct option is a.
Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $325,000, variable expenses of $159,600, and traceable fixed expenses of $72,800. The Alpha Division has sales of $635,000, variable expenses of $345,800, and traceable fixed expenses of $135,900. The total amount of common fixed expenses not traceable to the individual divisions is $138,200. What is the company's net operating income?
Answer:
Net operating income= $107,700
Explanation:
Giving the following information:
Beta Division:
Sales= $325,000
Variable expense= $159,600
Traceable fixed expense= $72,800
Alpha Division:
Sales= $635,000
Variable expense= $345,800
Traceable fixed expense= $135,900
We need to calculate the net operating income:
Beta division partial income= 325,000 - 159,600 - 72,800= 92,600
Alpha division partial income= 635,000 - 345,800 - 135,900= 153,300
Common fixed expense= (138,200)
Net operating income= $107,700
How many shares are held as treasury stock by Coca-Cola at December 31, 2015, and by PepsiCo at December 26, 2015
Answer:
December 31 ,2015 Coca cola and December 26, 2015
Suppose Skyler invests in an annuity that pays 3.2% annual interest, compounded monthly. If she contributes $155 every month for 10 years, how much interest would she earn during that time
Answer: $3,286.47
Explanation:
Find the future value of the annuity after 10 years.
Number of periods = 10 * 12 months = 120 months
Interest = 3.2% / 12 = 3.2/12%
Future value of annuity = Annuity * ( (1 + rate)^ number of periods- 1) / rate
= 155 * ( ( 1 + 3.2%/12) ¹²⁰- 1) / 3.2%/12
= $21,886.47
The find the amount that the money would have come to without being invested:
= 155 * 120 months
= $18,600
Interest is:
= 21,886.47 - 18,600
= $3,286.47
Broker Bill has the exclusive listing for Terri’s home. Bill brought Terri an offer from Alexis, which Terri accepted. In order to expedite the transaction, Bill offered to handle the escrow if both Terri and Alexis agreed. Which statement is true?
Answer: Bill's offer is ethical and legal and he can accept compensation for handling the escrow.
Explanation:
An exclusive listing refers to the type of real estate listing agreement whereby a broker is chosen as the sole agent of the seller. It should be noted that the right to retain the property is held by the seller rand has no obligation to the broker.
Based on the information given, it can be infered that Bill's offer is ethical and legal and he can accept compensation for handling the escrow.
