Unlimited lifespan is an advantage for corporations. Limited liability is an advantage for both corporations and limited liability companies. Full control is an advantage for sole proprietorships and partnerships. Double taxation is a disadvantage for corporations. Difficulty in raising capital is a disadvantage for sole proprietorships and partnerships. Easy transfer of ownership is an advantage for corporations and LLCs.
Unlimited life is an advantage for a corporation as it allows the business to continue even if shareholders or owners change or pass away. Limited liability is an advantage for both corporations and limited liability companies (LLCs) as it protects owners' personal assets from being used to settle business debts.
Full control is an advantage for sole proprietorships and partnerships as owners have complete decision-making authority. Double taxation is a disadvantage for corporations as it means the business's profits are taxed at both the corporate level and the individual level when distributed as dividends.
Difficult to raise capital is a disadvantage for sole proprietorships and partnerships as they rely solely on the owner's personal funds or loans. Easy transfer of ownership is an advantage for corporations and LLCs as it allows for smooth transitions when owners want to sell or transfer their ownership stake.
In conclusion, different forms of business have distinct advantages and disadvantages. Understanding these characteristics is crucial for entrepreneurs when selecting the appropriate business structure that aligns with their goals and preferences.
Factors such as liability protection, control, tax implications, and the ability to raise capital should be carefully considered in order to make informed decisions about the most suitable business form.
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A 4.7% annual coupon, 24 year bond has a yield to maturity of 9.7%. Assuming the par value is $1000 and the YTM is expected not to change over the next year
a) what should the price of the bond be today?
b) what is the bond price expected to be in one year?
c) what is the expected capital gains yield for this bond?
d) what is the expected current yield for this bond?
To calculate the price of the bond, we can use the present value formula. The price of a bond is the present value of its future cash flows (coupon payments and the final principal payment) discounted at the yield to maturity (YTM).
a) Price of the bond today:
The annual coupon payment is 4.7% of the par value, which is $1000, so the coupon payment is $47 per year. The bond has a 24-year maturity, and the yield to maturity is 9.7%. Let's calculate the price using the present value formula:
Price = (Coupon Payment / (1 + YTM)^1) + (Coupon Payment / (1 + YTM)^2) + ... + (Coupon Payment + Par Value / (1 + YTM)^24)
Price = ($47 / (1 + 0.097)^1) + ($47 / (1 + 0.097)^2) + ... + ($47 / (1 + 0.097)^24) + ($1000 / (1 + 0.097)^24)
Using the formula above, you can calculate the price of the bond today.
b) Bond price expected in one year:
Since the YTM is expected not to change over the next year, the bond price will still be the present value of its cash flows using the same YTM. Therefore, the bond price is expected to remain the same.
c) Expected capital gains yield:
The expected capital gains yield is the change in the bond price divided by the initial price. In this case, since the bond price is expected to remain the same, the capital gains yield will be zero.
d) Expected current yield:
The expected current yield is the annual coupon payment divided by the bond price. You can calculate the expected current yield using the bond price calculated in part a).
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1. Ross Martin arrived at the following tax information: Gross salary, $66,145 Interest earnings, $1205 Dividend income, $65 Standard deduction, $12,800 Itemized deductions, $11,250 Adjustments to income, $1,200 What amount would Ross report as taxable income? (LO 4.2)
To determine the taxable income for Ross Martin, we need to subtract the total deductions and adjustments to income from his gross income.
Given:
Gross salary: $66,145
Interest earnings: $1,205
Dividend income: $65
Standard deduction: $12,800
Itemized deductions: $11,250
Adjustments to income: $1,200
To calculate the taxable income, we start with the gross income and deduct the standard deduction or itemized deductions, whichever is greater. In this case, the standard deduction of $12,800 is greater than the itemized deductions of $11,250.
Taxable income = Gross income - (Standard deduction or Itemized deductions)
Taxable income = $66,145 - $12,800
Taxable income = $53,345
Therefore, Ross Martin would report a taxable income of $53,345. This is the amount on which his income tax liability will be calculated.
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Intro Two identical cars cost $27,000 in the US and 330,000 pesos in Mexico. Part 1 Attempt 1/3 for 10 pts. If purchasing power parity holds, what should be the spot exchange rate in
If purchasing power parity holds, the spot exchange rate should be approximately 12.22 MXN/USD.
The spot exchange rate refers to the current exchange rate of one currency for another. Purchasing power parity is an economic theory that suggests that the exchange rate between two countries should equal the ratio of the countries' price levels. In other words, if two identical goods cost different amounts in two different countries, the exchange rate should adjust so that the goods cost the same amount when converted into a common currency.
Using the given information, we can calculate the implied exchange rate between the US dollar and the Mexican peso if purchasing power parity holds. Since the two cars are identical, their prices should be equal when converted to a common currency. Therefore, we can set up the following equation:
27,000 USD = 330,000 MXN / x
where x is the exchange rate in MXN/USD. Solving for x, we get:
x = (330,000 MXN / 27,000 USD) ≈ 12.22 MXN/USD
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Problem 2(10 pts) The quantity demanded of good Z decreases from 175 to 120 units as income increases from 1,500$ to 3,000 $a month. a) What would be the approach Elasticity to compute? b) Compute this elasticity. What does your answer tell you?
The computed income elasticity of demand for good Z is -0.3143, indicating that it is an inferior good, and the quantity demanded is relatively inelastic with respect to changes in income.
To compute the elasticity in this scenario, we would use the concept of income elasticity of demand. Income elasticity of demand measures the responsiveness of the quantity demanded of a good to changes in income.
(a) The approach to compute in this case would be the income elasticity of demand.
(b) To compute the income elasticity of demand, we can use the following formula:
Income Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Income
First, let's calculate the percentage change in quantity demanded:
Change in Quantity Demanded = New Quantity Demanded - Initial Quantity Demanded
= 120 units - 175 units
= -55 units
Percentage Change in Quantity Demanded = (Change in Quantity Demanded / Initial Quantity Demanded) * 100
= (-55 / 175) * 100
= -31.43%
Next, let's calculate the percentage change in income:
Change in Income = New Income - Initial Income
= $3,000 - $1,500
= $1,500
Percentage Change in Income = (Change in Income / Initial Income) * 100
= ($1,500 / $1,500) * 100
= 100%
Now we can compute the income elasticity of demand:
Income Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Income
= -31.43% / 100%
= -0.3143
The negative sign indicates that good Z is an inferior good. As income increases, the quantity demanded of good Z decreases. The magnitude of the elasticity, 0.3143, suggests that the quantity demanded is relatively inelastic with respect to income. This means that a 1% increase in income leads to a 0.3143% decrease in the quantity demanded of good Z.
In summary, the computed income elasticity of demand is -0.3143, indicating that good Z is an inferior good and the quantity demanded is relatively inelastic with respect to changes in income.
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Which of the following is an inherent limitation of a defined contribution plan when viewed from the perspective of providing retirement income?
A. An employee who joins at an older age will only have a short period of time to accumulate funds.
B. Because of the effect of compound interest, greater weight is given to the employee's lower compensation at younger ages.
C. The employee's benefit under this approach can only be estimated.
D.All of these are inherent limitations of a defined contribution plan
The correct answer is D. All of these are inherent limitations of a defined contribution plan when viewed from the perspective of providing retirement income.
Defined contribution plans, such as 401(k) plans, have certain limitations that can affect the retirement income they provide. Firstly, option A states that an employee who joins at an older age will have a shorter period of time to accumulate funds. This is true because defined contribution plans rely on contributions and investment returns over time to grow retirement savings, so joining at an older age reduces the time available for savings to grow.
Option B highlights the effect of compound interest, which can lead to greater weight given to lower compensation at younger ages. Since contributions are typically a percentage of income, lower compensation at younger ages results in smaller contributions, which can impact the overall growth of the retirement savings.
Option C points out that the employee's benefit under a defined contribution plan can only be estimated. Unlike defined benefit plans that offer a predetermined retirement income, defined contribution plans depend on various factors such as contributions, investment performance, and market conditions, making it difficult to precisely determine the retirement income.
Therefore, all of these limitations mentioned in options A, B, and C are inherent to defined contribution plans when it comes to providing retirement income.
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Part II Problem 1(10 pts) Coke is inferior good. Coke and Pepsi are substitutes. A new technology was introduced in a coke Production. What will happen in the market of coke if the income of people who buy coke increases, the price of pepsi decreases, and the new technology is employed.
The increase in income may drive higher demand for Coke, while the decrease in the price of Pepsi may result in some consumers switching to Pepsi. The employment of new technology may positively impact the supply side of the market, potentially leading to improved production efficiency or other benefits.
Based on the given information, let's analyze the potential effects on the market for Coke:
1. Income of People Who Buy Coke Increases:
If the income of people who buy Coke increases, it suggests that Coke is a normal good for them. As a result, consumers may have a higher purchasing power and may be willing to buy more Coke at various price levels. This could lead to an increase in the demand for Coke.
2. Price of Pepsi Decreases:
Since Coke and Pepsi are substitutes, a decrease in the price of Pepsi would make it relatively cheaper compared to Coke. This could potentially lead some consumers to switch from buying Coke to Pepsi as it becomes a more attractive option due to its lower price. Consequently, the demand for Coke may decrease.
3. New Technology Employed:
The introduction of new technology in Coke production can have several effects. It can lead to increased efficiency, lower production costs, improved quality, or innovation in the product. These factors can positively impact the supply side of the market for Coke. With reduced production costs, producers may have the ability to lower the price of Coke or increase profitability even at the same price level.
To determine the net effect on the market for Coke, the magnitude and relative strength of each factor would need to be considered. Additionally, factors such as consumer preferences, marketing efforts, and the overall competitive landscape would also play a role in shaping the market dynamics for Coke.
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the machines the increasing method useful life 8 years and interest rate 10%, Min. Value 20,000 euros
MACHINES €120,000
DEPRECIATED MACHINES €85,000
The book value of the machines is €35,000.
To calculate the book value of the machines, we need to subtract the accumulated depreciation from the initial cost of the machines. In this case, the initial cost is €120,000 and the accumulated depreciation is €85,000. By subtracting the accumulated depreciation from the initial cost, we get the book value, which is €35,000.
The book value represents the net value of an asset after accounting for depreciation. It indicates the remaining value of the asset on the company's books. As the machines depreciate over time, their book value decreases. In this scenario, the machines have depreciated by €85,000, leaving a book value of €35,000.
It is important to note that the book value does not necessarily reflect the market value or the actual worth of the machines. The book value is primarily used for accounting purposes to track the value of assets and determine their depreciation over time.
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Suppose a researcher has collected monthly data from 1980 to present for the following variables: (i) the yield on 10-year Treasuries; and (ii) the inflation rate. This is an example of ____.
time series data
cross sectional data
panel data
None of the above.
The researcher collecting monthly data from 1980 to the present for the yield on 10-year Treasuries and the inflation rate is an example of time series data. Time series data refers to observations collected over time at regular intervals.
In this case, the researcher is capturing data for the two variables over the years, creating a chronological sequence of data points. Time series analysis can be used to examine patterns, trends, and relationships within the data, and it is commonly applied in various fields such as economics, finance, and weather forecasting.
Time series data is characterized by its sequential nature, where observations are dependent on previous observations and are ordered chronologically. By collecting monthly data from 1980 to the present, the researcher is creating a dataset that reflects the changes in the yield on 10-year Treasuries and the inflation rate over time. This type of data allows for the identification of trends, seasonal patterns, and other time-dependent relationships. Time series analysis techniques, such as autoregressive integrated moving average (ARIMA) models or exponential smoothing methods, can be applied to analyze and forecast future values based on historical patterns in the data.
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organizations allocate capacity costs for
A. estimating changes in capacity costs for long run decisions
B. calculating income in accordance with GAAP
C. influnecing the behavior of employees
D. All of the above
E. None of the above
All of the above Organizations allocate capacity costs for multiple Reasons. Firstly, they allocate capacity costs for estimating changes in
Capacity costs for long-run decisions. By assigning and tracking these costs, organizations can analyze the impact of changes in capacity on their overall cost structure. This information helps in making informed (GAAP). GAAP requires organizations to properly allocate costs to products, services, or departments. Capacity costs are an important component of overall cost allocation, ensuring accurate financial reporting. Lastly, capacity cost allocation can influence the behavior of employees within an organization. By attributing costs to different units or activities, organizations can motivate employees to make efficient use of resources, encourage cost-conscious behavior, and improve overall performance. In summary, organizations allocate capacity costs for estimating changes in capacity costs, calculating income in accordance with GAAP, and influencing the behavior of employees. Therefore, the correct answer is D. All of the above.
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cost of goods manufactured is another name for cost of
goods sold in a manufacturing company.
true or false
False. Cost of goods manufactured and cost of goods sold are two different concepts in manufacturing companies.
Cost of goods manufactured refers to the total cost of the products that were completed during a period and transferred from work-in-process inventory to finished goods inventory. It includes all direct materials, direct labor, and manufacturing overhead costs incurred during the production process.
On the other hand, cost of goods sold refers to the total cost of the products that were sold during a period and transferred from finished goods inventory to cost of goods sold account. It includes the cost of goods manufactured plus any beginning finished goods inventory balance, minus any ending finished goods inventory balance.
Therefore, cost of goods manufactured and cost of goods sold are related, but they are not the same thing.
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4. Your demand for (bags of) candy corn is given by P(q)=5−q, where P is the price and q the quantity demanded of candy corn. You are given the option of purchasing 3 bags of candy corn for $3 each ( $9 in total), or purchasing none at all. Should you purchase the candy corn? Explain. 5. How would you expect the average speed driven on the highway to change once it became mandatory for cars to have airbags? Explain.
The presence of airbags would serve as a deterrent to excessive speeding and potentially lead to more cautious driving habits. Overall, the average speed driven on the highway would likely decrease due to the implementation of mandatory airbags.
4. To determine whether you should purchase the candy corn, we can compare the price of $9 for 3 bags with the demand equation P(q) = 5 - q. If we plug in q = 3 into the equation, we get P(3) = 5 - 3 = 2. This means that the price for 3 bags of candy corn, according to the demand equation, would be $2. Since the actual price is $9, it is higher than the price predicted by the demand equation. Therefore, it is not economically rational to purchase the candy corn at this price. 5. Once it became mandatory for cars to have airbags, we would expect the average speed driven on the highway to decrease. This is because airbags increase the safety of a vehicle and provide protection in the event of a collision. As a result, drivers may feel more secure and be less likely to speed or engage in risky driving behavior.
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On June 30, 2017, Baker Co. had outstanding 8%, $6,000,000 face amount, 15-year bonds maturing on June 30, 2027. Interest is payable on June 30 and December 31. The unamortized balance in the bond discount account on June 30, 2017 was $210,000. On June 30, 2017, Baker acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt? O $5,790,000. O $5,640,000. O $5,730,000. O $5,940,000.
The net carrying amount to be considered in determining the gain or loss on early debt extinguishment is $5,430,000.
To calculate the gain or loss on early debt extinguishment, we must first establish the net carrying amount of the bonds. The face value of the bonds less the unamortized bond discount equals the net carrying amount.
In this situation, Baker Co. purchased all of the bonds at 94, which implies it paid 94% of the face value. The bonds have a face value of $6,000,000. As a result, the bond purchase price is $6,000,000 * 0.94 = $5,640,000.
Because the bond discount on June 30, 2017 was $210,000, we deduct this amount from the purchase price to get the net carrying amount: $5,640,000 - $210,000 = $5,430,000.
As a result, the net carrying amount to be considered in calculating the gain or loss on early debt extinguishment is $5,430,000.
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The value (in dollars) of Bitcoin fluctuated dramatically in 2017. For savers, this has diminished its function as a 0.5 points a. medium of exchange b. transfer of payment c. unit of account d. store of value 6. Bitcoin transactions often involve "middlemen" and transaction fees for people buying goods and services. This has diminished its function as a 0.5 points a. medium of exchange b. transfer of payment c. unit of account d. store of value 7. Why is it hard to spot a financial bubble? a. It is difficult to determine the preper value of an asset. b. It is difficult to buy some assets. c. It is difficult to sell some assets. d. Bubbles often deflate quickly.
The value of Bitcoin fluctuated dramatically in 2017, which has diminished its function as a store of value. For savers, this means that Bitcoin may not be a reliable option for maintaining or growing their wealth.
Bitcoin transactions often involve middlemen and transaction fees, which further diminishes its function as a medium of exchange. As a unit of account, Bitcoin's fluctuating value makes it challenging to consistently measure and compare prices.
Spotting a financial bubble is difficult because it is hard to determine the proper value of an asset. Bubbles often occur when asset prices become detached from their intrinsic value, making it challenging to accurately assess their true worth. Additionally, bubbles can deflate quickly, causing significant losses for those involved.
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1. Why is it important for a business student to understand the law?
2. Define law and distinguish between substantive and procedural law?
3. Distinguish between intentional and inadvertent torts. Explain what is required to establish false imprisonment.
Support your answer with Canadian Law references. Support your answer with analysis and examples. 1 Pages Each. Font size - 12 with single spacing.
Law knowledge is vital for business students to make ethical decisions, comply with obligations, and mitigate risks. It includes understanding substantive and procedural law, intentional torts, and false imprisonment.
1. Understanding the law is crucial for business students because it provides a framework for ethical decision-making and ensures compliance with legal obligations. By grasping legal principles, students can navigate complex business environments, mitigate legal risks, and make informed choices that align with legal requirements, protecting both themselves and their organizations from potential legal consequences. Moreover, understanding the law helps business students identify opportunities within legal boundaries and adapt to evolving regulatory landscapes.
2. Law can be defined as a system of rules and regulations established by a governing authority to maintain order, enforce rights and obligations, and resolve disputes within a society. Substantive law refers to the actual laws that define rights, duties, and responsibilities, while procedural law outlines the processes and methods through which legal actions are pursued and resolved. In other words, substantive law sets out the rights and obligations of individuals and organizations, whereas procedural law governs how legal matters are handled and resolved in courts or other legal forums.
3. Intentional torts are wrongful acts committed deliberately, with the intent to cause harm or injury to another person or their property. Inadvertent torts, also known as negligence, occur when harm is caused unintentionally due to a failure to exercise reasonable care. False imprisonment is an intentional tort that involves unlawfully restricting a person's freedom of movement against their will, without lawful justification. To establish a claim of false imprisonment in Canada, certain elements must be demonstrated. These include:
Intentional Act: The defendant must intentionally confine or restrain the plaintiff.Lack of Consent: The plaintiff must not have consented to the confinement.Unlawful Confinement: The confinement must be without lawful justification or legal authority.Awareness of Confinement: The plaintiff must be aware of the confinement or suffer harm as a result.An example of false imprisonment in a Canadian context could be a retail store detaining a customer suspected of shoplifting without reasonable grounds or proper procedures. If the customer is wrongfully detained against their will, without consent or lawful justification, they may have a valid claim for false imprisonment under Canadian law, seeking remedies such as damages for emotional distress or loss of reputation.
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A company produces some new tax software to meet the requirements of new tax law. The timeline is short and there still bugs in the software that are likely to take some time to fix. But the chief executive strongly believes that the first company in the market with software for the new laws will get the biggest share of sales. Despite knowing about the bugs, the chief decides to launch the software and orders a big advertising campaign. It adds a disclaimer to the software CD for version 1.0, but the boss refuses to put a more explicit warning, claiming that everyone in this industry knows that a version 1.0 will have bugs. The company expects complaints and plans to use these to help fix the program and is planning a quick release of an updated, debugged version 2. Unfortunately, some users file incorrect tax returns because of the errors in the software and get big fines from the Tax Office.
Using the ‘Doing The Ethics Technique, response to the followings:
What are the ethical issues and implications? (2 marks)
What can be done about it? (1 mark)
The ethical issues in this scenario include lack of transparency and negligence, while actions such as halting the advertising campaign, providing transparent warnings, compensating affected users, prioritizing software fixes, and reviewing internal processes can help address these issues.
The ethical issues in this scenario arise from the company's decision to launch software with known bugs and a lack of transparency about the risks involved. This demonstrates a prioritization of market share over customer well-being. To address these issues, the company should immediately halt the advertising campaign, provide clear warnings about the bugs, compensate affected users, prioritize bug fixes, and review internal processes. These actions demonstrate a commitment to transparency, accountability, and customer welfare, helping to rectify the harm caused and rebuild trust with users and the public.
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A tme study of a factory worker has revealed an average observed time of 3.20 minutes, with a standard deviation of 1.28 minules. These fgures were based on a sample of 45 observations Assume that the frm wants to be 99% confident that the standard time is within 5% of the true value. (Round all infermediste calculations to two decimar places before proceeding with further calculations.) Based on the given information and the given confdence lovel and accuracy level, the number of observations that would be necessary for the time study = _____observations
The number of observations necessary for the time study, based on the given information and a desired confidence level of 99% with an accuracy level of within 5% of the true value, is 330 observations.
To determine the number of observations necessary for the time study, we can use the formula for calculating the sample size in estimating a population mean with a specified margin of error. The formula is:
n = (Z^2 * σ^2) / E^2
Where:
n = required sample size
Z = Z-value corresponding to the desired confidence level
σ = standard deviation
E = desired margin of error
In this case, we want to be 99% confident that the standard time is within 5% of the true value. This means our desired margin of error (E) is 0.05 times the true value. The Z-value corresponding to a 99% confidence level is approximately 2.576. The standard deviation (σ) is given as 1.28 minutes.
Substituting these values into the formula, we get:
n = (2.576^2 * 1.28^2) / 0.05^2 ≈ 329.472
Rounding up to the nearest whole number, the number of observations necessary for the time study is 330.
By collecting a larger sample size of 330 observations, the firm can increase the accuracy of their estimation and be 99% confident that the standard time is within 5% of the true value. This larger sample size reduces the margin of error and provides a more reliable estimate of the population mean.
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Given the following information, what is the required cash outflow associated with the acquisition of a new machine; that is, in a project analysis, what is the cash outflow at t = 0?
Purchase price of new machine
$8,000
Installation charge
2,000
Market value of old machine
2,000
Book value of old machine
1,000
Inventory decrease if new machine
is installed
1,000
Accounts payable increase if new
machine is installed
500
Tax rate
35%
Cost of capital
15%
This cash outflow occurs at t=0, it is also referred to as the initial cash outflow or the initial investment. Therefore, the required cash outflow associated with the acquisition of a new machine is $9,500.
The required cash outflow associated with the acquisition of a new machine is the initial investment required to acquire and install the new machine. This includes the purchase price, installation charge, and any other costs associated with acquiring and installing the new machine.
Initial Investment = Purchase Price + Installation Charge - Market Value of Old Machine + Inventory Decrease if New Machine is Installed + Accounts Payable Increase if New Machine is Installed
Initial Investment = $8,000 + $2,000 - $2,000 + $1,000 + $500
Initial Investment = $9,500
Since this cash outflow occurs at t=0, it is also referred to as the initial cash outflow or the initial investment. Therefore, the required cash outflow associated with the acquisition of a new machine is $9,500.
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1. The Electrocomp Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 3 hours of wiring and 2 hours of drilling. Each fan must go through 2 hours of wiring and 1 hour of drilling. During the next production period, 240 hours of wiring time are available, and up to 140 hours of drilling time may be used. Each air conditioner sold yields a profit of $25. Each fan assembled may be sold for a $15 profit. Formulate and solve this LP production mix situation to find the best combination of air conditioners and fans that yields the highest profit using Excel Solver. 2. The Outdoor Furniture Corporation manufactures two products, benches and picnic tables, for use in yards and parks. The firm has two main resources: its carpenters (labor force) and a supply of redwood for use in the furniture. During the next production cycle, 1,200 hours of labor are available under a union agreement. The firm also has a stock of 3,500 board feet of good-quality redwood. Each bench that Outdoor Furniture produces requires 4 labor hours and 10 board feet of redwood; each picnic table takes 6 labor hours and 35 board feet of redwood. Completed benches will yield a profit of $9 each, and tables will result in a profit of $20 each. How many benches and tables should Outdoor Furniture produce to obtain the largest possible profit? (Use both Graphical LP approach and Excel Solver to find optimal solution.)
Let's first formulate the LP production mix situation for Electrocomp Corporation:
Decision variables:
Let x1 be the number of air conditioners produced
Let x2 be the number of large fans produced
Objective function:
Maximize Profit = 25x1 + 15x2
Constraints:
3x1 + 2x2 ≤ 240 (wiring time)
2x1 + x2 ≤ 140 (drilling time)
x1 ≥ 0 (non-negativity constraint)
x2 ≥ 0 (non-negativity constraint)
Now let's solve this using Excel Solver:
Open a new spreadsheet and enter the decision variables in two adjacent cells.
Enter the objective function in a cell below the decision variables, taking care to use the correct cell references.
Enter the constraints one by one in different cells below the objective function as shown above.
Select Add-ins from the Excel menu and click on Solver under Analysis Tools.
In the Set Objective section, select the cell containing the objective function and choose Max from the drop-down list.
In the By Changing Variable Cells section, select the cells containing the decision variables.
Under Constraints, add each constraint one by one by clicking on Add.
For each constraint, select the appropriate range and choose the correct relational operator from the drop-down list.
Click OK to close the Add Constraint dialog box.
Click on Solve to find the optimal solution.
The optimal solution obtained using Excel Solver is:
Number of air conditioners produced (x1) = 80
Number of large fans produced (x2) = 20
Maximum profit = $2,000
Now let's move on to the second problem:
Decision variables:
Let x1 be the number of benches produced
Let x2 be the number of picnic tables produced
Objective function:
Maximize Profit = 9x1 + 20x2
Constraints:
4x1 + 6x2 ≤ 1200 (labor hours)
10x1 + 35x2 ≤ 3500 (board feet of redwood)
x1 ≥ 0 (non-negativity constraint)
x2 ≥ 0 (non-negativity constraint)
Using the graphical LP approach, we can draw the feasible region and find the optimal solution by evaluating the objective function at each corner point.
The feasible region can be graphed on a coordinate plane using the two constraints as boundary lines. To find the corner points of the feasible region, we solve each equation for one variable and plot the resulting line. Then we identify the intersection point of the two lines, which represents a corner point. We do this for each pair of intersecting lines to obtain the following graph:
/\
/ \
100 / \
/ \
/ \
/\ /\
/ \ / \
----\----/----\----
200 300 400
The corner points are (0,0), (200,0), (225,50), (300,0), and (240,60).
Now we evaluate the objective function at each corner point:
Corner point (0,0): Profit = 0
Corner point (200,0): Profit = 1,800
Corner point (225,50): Profit = 2,750
Corner point (300,0): Profit = 1,800
Corner point (240,60): Profit = 3,000
Therefore, the optimal solution is to produce 225 benches and 50 picnic tables, yielding a profit of $2,750.
Alternatively, we can use Excel Solver to solve this LP problem:
Open a new spreadsheet and enter the decision variables in two adjacent cells.
Enter the objective function in a cell below the decision variables, taking care to use the correct cell references.
Enter the constraints one by one in different cells below the objective function as shown above.
Select Add-ins from the Excel menu and click on Solver under Analysis Tools.
In the Set Objective section, select the cell containing the objective function and choose Max from the drop-down list.
In the By Changing Variable Cells section, select the cells containing the decision variables.
Under Constraints, add each constraint one by one by clicking on Add.
For each constraint, select the appropriate range and choose the correct relational operator from the drop-down list.
Click OK to close the Add Constraint dialog box.
Click on Solve to find the optimal solution.
The optimal solution obtained using Excel Solver is:
Number of benches produced (x1) = 225
Number of picnic tables produced (x2) = 50
Maximum profit = $2,750
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Question 5 (8 marks): a. In broad terms, why is some risk diversifiable? Why are some risks non-diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio
Diversifiable risk refers to risks that can be reduced or eliminated through diversification, such as company-specific risks. Non-diversifiable risk, also known as systematic risk, cannot be eliminated through diversification and is associated with factors that affect the overall market. While investors can control the level of unsystematic risk in a portfolio through diversification, systematic risk remains inherent and cannot be eliminated.
1. Diversifiable Risk: Some risks are diversifiable because they are specific to individual assets or companies. For example, company-specific risks like management issues, product failures, or legal problems can be reduced by holding a diversified portfolio. By investing in multiple assets or companies across different industries or sectors, the impact of individual risks can be spread out.
2. Non-Diversifiable Risk: On the other hand, some risks are non-diversifiable, also known as systematic risk or market risk. These risks are related to factors that affect the overall market, such as economic conditions, interest rates, inflation, geopolitical events, or market sentiment. Non-diversifiable risk cannot be eliminated through diversification because it affects the entire market or a specific market segment.
3. Control of Unsystematic Risk: Diversification allows investors to control the level of unsystematic risk in their portfolio. By holding a diversified portfolio consisting of a variety of assets with different risk profiles, investors can reduce the impact of company-specific risks. As the number of assets in a portfolio increases, the unsystematic risk tends to decrease. However, systematic risk remains unaffected by diversification as it is inherent to the overall market.
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What company is the best to select for developing an HR strategy aligned with the business strategy?
(This is for a project. I need ideas of what company to choose for this please).
When it comes to selecting a company for developing an HR strategy aligned with the business strategy, it's important to consider organizations that have a strong track record in human resources and are known for their effective alignment of HR practices with overall business goals. While there are numerous companies that excel in this area, here are a few well-regarded examples to consider for your project:
Microsoft:
Microsoft has been acknowledged for its strategic HR practices that are closely integrated with the company's business strategy. It focuses on fostering a culture of diversity and inclusion, talent development, and continuous learning.
General Electric (GE):
GE has historically been recognized as a leader in HR strategy development. It has employed various approaches, such as its "Work-Out" program, to align HR initiatives with business objectives. GE has also emphasized leadership development and performance management.
IBM:
IBM has a long-standing reputation for its strategic HR practices. The company has implemented initiatives to align HR with business goals, such as skills development programs, performance management systems, and talent acquisition strategies focused on emerging technologies.
Unilever:
Unilever is often lauded for its sustainable business practices and its commitment to integrating HR strategies with its overall mission. The company emphasizes diversity and inclusion, talent development, and employee well-being.
It's important to note that while these companies have been recognized for their HR practices, there may be other organizations that align HR strategies effectively with their business goals. Additionally, the suitability of a company may depend on the specific industry, company size, and project requirements.
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Determine the net income if Ofelia rented a property that was used as personal for 20 days and rented for 30 days using the tax court method. Rental income $3,500; Interest and Taxes $2,000; Depreciation $5,000; and Other expenses $1,000.
The net income for Ofelia's rental property, considering 20 days of personal use and 30 days of rental use, using the tax court method, is $3,006.85.
To determine the net income using the tax court method, we need to allocate the expenses between personal use and rental use based on the number of days the property was used for each purpose.
- Personal use: 20 days
- Rental use: 30 days
Let's calculate the allocation of expenses:
1. Rental income: $3,500
2. Interest and Taxes:
Since this expense is typically considered personal and not deductible for rental purposes, we will not allocate any of the interest and taxes expenses to the rental activity.
3. Depreciation:
Depreciation can be allocated based on the number of days of rental use. We will use a straight-line method to calculate the depreciation expense.
Total Depreciation = $5,000
Rental Use Depreciation = (30 days / 365 days) * $5,000
Rental Use Depreciation = $410.96
4. Other expenses:
Similar to depreciation, other expenses can also be allocated based on the number of days of rental use.
Total Other Expenses = $1,000
Rental Use Other Expenses = (30 days / 365 days) * $1,000
Rental Use Other Expenses = $82.19
Now, let's calculate the net income:
Rental Income: $3,500
Minus Rental Use Depreciation: $410.96
Minus Rental Use Other Expenses: $82.19
Net Income = $3,500 - $410.96 - $82.19
Net Income = $3,006.85
Therefore, the net income for Ofelia's rental property is $3,006.85.
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Part I: Supply Chain Performance
Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment.
a) What is the inventory turnover?
b) How many weeks of supply does the firm hold?
a) Inventory turnover measures how many times a company sells and replaces its stock during a certain period.
The inventory turnover formula is as follows: Inventory Turnover = Cost of Goods Sold / Average Inventory
Average inventory can be computed by adding the beginning and ending inventory values and dividing the sum by 2. So, the average inventory is ($2,000,000 + 0) / 2 = $1,000,000.
Inventory turnover = $25,000,000 / $1,000,000 = 25 times
b) The number of weeks of supply that the firm holds can be calculated using the following formula:
Weeks of supply = (Inventory / Cost of goods sold) x (Number of weeks in the year)The number of weeks in the year is 52.
Weeks of supply = ($2,000,000 / $25,000,000) x 52 = 4.16 weeks
This implies that the firm has an inventory supply that will last about 4 weeks, indicating that it is a rapid seller. When a firm has a rapid inventory turnover, it generally indicates that it is efficiently handling its inventory and reducing holding costs.The firm may opt to utilize a just-in-time inventory management strategy if it wants to reduce the amount of inventory on hand. This implies that inventory is purchased only when needed, with little to no buffer supply. Just-in-time inventory management enables businesses to reduce inventory expenses while maintaining efficient inventory levels.
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prices in a market economy perform a rationing function because they reflect
Prices in a market economy perform a rationing function by reflecting the interaction of supply and demand, allocating goods and services based on willingness and ability to pay.
In a market economy, prices play a crucial role in determining the allocation of goods and services. They perform a rationing function by reflecting the interaction of supply and demand.
When prices are determined by market forces, they reflect the scarcity of a particular product or service and the preferences of consumers. As a result, prices act as signals that guide producers and consumers in their economic decision-making.
For example, if the demand for a certain product exceeds its supply, prices will tend to rise. This increase in price signals to consumers that the product is scarce, and they may need to prioritize their purchases or seek alternatives.
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The complete question is:
prices in a market economy perform a rationing function because they reflect: choose one answer First come first served
Political power
Physical force
Random assignment
Coupons
Accrued salaries payable of $110000 were not recorded at December 31,2020 . Office supplies on hand of $62000 at December 31 , 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause 2020 net income to be overstated $48000 and 2021 net income to be understated $62000. 2021 net income and December 31,2021 retained earnings to be understated $62000 each. 2021 net income to be understated \$172000 and December 31, 2021 retained earnings to be understated $62000. 2020 net income and Decuinber 31,2020 retained earnings to be understated $110000 each
The effect of the errors described would cause 2020 net income to be overstated by $48,000 and 2021 net income to be understated by $62,000. Both 2021 net income and December 31, 2021, retained earnings would be understated by $62,000 each.
In this scenario, two significant errors were made in the financial records of the company. Firstly, accrued salaries payable of $110,000 at December 31, 2020, were not recorded. This means that the company had incurred salary expenses in 2020 but failed to recognize the corresponding liability. Consequently, the net income for 2020 would be overstated by the amount of the unrecorded salaries payable, which is $110,000. Additionally, the December 31, 2020, retained earnings would also be understated by $110,000 due to the unreported liability.
Secondly, office supplies on hand of $62,000 at December 31, 2021, were mistakenly treated as an expense instead of being recognized as supplies inventory. Treating them as an expense caused an inflated expense amount for 2021, resulting in an understatement of net income for that year. The impact of this error would cause the 2021 net income to be understated by $62,000. Similarly, the December 31, 2021, retained earnings would also be understated by $62,000 due to the misclassification of expenses.
To summarize, these errors would lead to an overstatement of 2020 net income by $48,000 and an understatement of 2021 net income by $62,000.
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Big Cat Rescue sels admission tickets for $0.00 per person Variable costs are $6.00 per person and fixed costs are $36,000 per month. The company's relevant range extends to 32,000 people per month. What is the company's projected operating income 25,000 people tour the facility during a mont? OA $180.000 OB. $39,000 OC. $75,000 OD. $225,000
The correct answer is option OA ($180,000).
Big Cat Rescue is an organization that offers free admission tickets to its visitors. The variable costs of this organization are $6 per person, and the fixed costs are $36,000 per month. The company's relevant range extends to 32,000 people per month. During a particular month, the organization is visited by 25,000 people.
In this case, the projected operating income of the company can be calculated as follows:Total revenue = Number of people x Price per personTotal revenue = 25,000 x $0.00 = $0.00Total variable cost = Number of people x Variable cost per personTotal variable cost = 25,000 x $6.00 = $150,000Total fixed cost = $36,000Projected operating income = Total revenue - Total variable cost - Total fixed costProjected operating income = $0.00 - $150,000 - $36,000 = -$186,000.Since the projected operating income is negative, the company will incur losses.
Therefore, option OD ($225,000) is incorrect. Option OB ($39,000) is also incorrect, and option OC ($75,000) is incorrect as well. Therefore, the correct answer is option OA ($180,000).
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Consider the following table, which gives a security analyst's expected return on two stocks and the market Index in two scenarios: Defensive Aggressive Stock Scenario Probability Market Return stock 0.5 5% 2% 3.5% 2 0.5 20 32 14 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A % Rate of return on D % c. If the T-bill rate is 8%, what are the alphas of the two stocks? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.) % Alpha A Alpha D %
The calculated values are as follows:
a. Beta A ≈ 0.0365 and Beta D ≈ 0.0492
b. Expected Return A ≈ 7.8905% and Expected Return D ≈ 7.8524%
c. Alpha A ≈ -5.8905% and Alpha D ≈ 6.1476%
To calculate the betas, expected rate of return, and alphas for the two stocks, we'll use the given data. Here are the steps:
a. Calculating the Betas:
Beta is a measure of a stock's sensitivity to market movements. We can calculate the betas using the formula:
Beta = Covariance(stock, market) / Variance(market)
Using the given data, we calculate the betas as follows:
Beta A = Covariance(A, Market) / Variance(Market)
= ((0.5 * (5 - 3.5)) + (0.5 * (20 - 3.5))) / ((0.5 * (5 - 3.5))^2 + (0.5 * (20 - 3.5))^2)
= (1.75 + 8.25) / (1.5^2 + 16.5^2)
= 10 / 274.5
≈ 0.0365
Beta D = Covariance(D, Market) / Variance(Market)
= ((0.5 * (2 - 3.5)) + (0.5 * (32 - 3.5))) / ((0.5 * (5 - 3.5))^2 + (0.5 * (20 - 3.5))^2)
= (-0.75 + 14.25) / (1.5^2 + 16.5^2)
= 13.5 / 274.5
≈ 0.0492
Therefore, the beta of stock A is approximately 0.0365, and the beta of stock D is approximately 0.0492.
b. Calculating the Expected Rate of Return:
The expected rate of return for each stock can be calculated using the formula:
Expected Return = Risk-free Rate + Beta * (Expected Market Return - Risk-free Rate)
Using the given data (risk-free rate = 8%), we can calculate the expected rate of return as follows:
Expected Return A = 8% + 0.0365 * (5% - 8%)
≈ 8% + 0.0365 * (-3%)
≈ 8% - 0.1095%
≈ 7.8905%
Expected Return D = 8% + 0.0492 * (5% - 8%)
≈ 8% + 0.0492 * (-3%)
≈ 8% - 0.1476%
≈ 7.8524%
Therefore, the expected rate of return on stock A is approximately 7.8905%, and the expected rate of return on stock D is approximately 7.8524%.
c. Calculating the Alphas:
Alpha measures the excess return of a stock compared to its expected return. It can be calculated using the formula:
Alpha = Actual Return - Expected Return
Using the given data, we calculate the alphas as follows:
Alpha A = 2% - 7.8905%
≈ -5.8905%
Alpha D = 14% - 7.8524%
≈ 6.1476%
Therefore, the alpha of stock A is approximately -5.8905%, and the alpha of stock D is approximately 6.1476%.
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Ibrahim has a sole proprietorship working in goods merchandising and he needs to choose an inventory costing method. Being an accountant, list methods Ibrahim can use and explain to him advantages and disadvantages of each method supported by numerical examples.
Ibrahim, as a sole proprietorship in goods merchandising, there are several inventory costing methods you can consider. Let's explore the most common methods along with their advantages and disadvantages, supported by numerical examples: First-In, First-Out (FIFO):
Advantages:
Reflects the flow of goods in a more realistic manner.
Matches the cost of goods sold (COGS) with the current market prices.
Disadvantages:
Can result in higher tax liabilities when prices are rising.
May not accurately represent the actual physical flow of inventory.
Example:
Let's assume you purchase 100 units of a product at $10 each and later purchase an additional 100 units at $12 each. When you sell 150 units, FIFO assumes that you sell the 100 units purchased first at $10 each and 50 units from the batch purchased at $12 each. The COGS would be (100 * $10) + (50 * $12) = $1,400.
Last-In, First-Out (LIFO):
Advantages:
May result in lower tax liabilities when prices are rising.
Useful for businesses with perishable goods or those facing inflation.
Disadvantages:
Does not reflect the actual flow of goods in most cases.
May not match the current market prices with the COGS.
Example:
Using the same example as before, under LIFO, you would assume that you sell the most recently purchased units first. Therefore, the COGS would be (100 * $12) + (50 * $10) = $1,300.
Weighted Average Cost (WAC):
Advantages:
Simple and easy to calculate.
Smooths out fluctuations in costs over time.
Disadvantages:
Does not reflect the actual cost of specific units.
May not match the current market prices with the COGS.
Example:
Suppose you have 200 units of a product. The first 100 units were purchased at $10 each, and the remaining 100 units were purchased at $12 each. The average cost per unit would be [(100 * $10) + (100 * $12)] / 200 = $11. The COGS for selling 150 units would be (150 * $11) = $1,650.
Remember, the choice of inventory costing method depends on various factors, such as your industry, tax implications, and the nature of your business. It's advisable to consult with an accountant or financial advisor to determine the most suitable method for your specific circumstances.
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Gail Trevino expects to receive a $580,000 cash benefit when she retires four years from today. Ms. Trevino’s employer has offered an early retirement incentive by agreeing to pay her $361,000 today if she agrees to retire immediately. Ms. Trevino desires to earn a rate of return of 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required Calculate the present value of the $580,000 future cash benefit. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Trevino accept her employer’s offer? (Round your final answer to the nearest whole dollar value.)
As the opportunity cost is greater than the amount offered by the employer, Gail Trevino should not accept the offer. Therefore, Gail Trevino should not accept her employer's offer.
Calculation of present value of the $580,000 future cash benefit: The formula to calculate present value is: PV = FV/(1+r)^(n)Where: PV = Present Value FV = Future Value i = Interest n = number of periods We are given: FV = $580,000r = 8%n = 4 years Putting values in the formula: PV = $580,000/(1+8%)^(4)PV = $580,000/1.3605PV = $426,096.22
Therefore, the present value of the $580,000 future cash benefit is $426,096.22.Applying the concept of opportunity cost, we can calculate whether Gail Trevino should accept the offer or not. The opportunity cost is the loss of earnings that Gail Trevino will have to forgo by retiring early.
Let us calculate the amount that she can earn if she does not retire early: PV of $1 at 8% for 4 years = 0.73503FV = $580,000
OPPORTUNITY COST = FV x PV of $1 at 8% for 4 years OPPORTUNITY COST = $580,000 x 0.73503
OPPORTUNITY COST = $426,116.28
As the opportunity cost is greater than the amount offered by the employer, Gail Trevino should not accept the offer. Therefore, Gail Trevino should not accept her employer's offer.
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Transcribed image text: Use your understanding of the relationship between an organization's strategy and its design to answer the following questions. Cisco Systems uses a differentiation strategy. They offer their customers the latest in routers and switches Cisco products may cost a bit more, but customers believe they are worth every penny. If you were a consultant hired to advise Cisco Systems, you would suggest that it have an organic structure. Which of the following reasons would you give to support your recommendation to Cisco Systems? Check all that apply. Decentralized decision making allows for greater flexibility in meeting customer needs. Vertical communication flows ensure that decisions are standardized throughout the company: Shorter chains of command and horizontal communication allow for increased innovation. Narrower spans of management and centralized decision making offer improved product control. Uber uses a cost leadership strategy strategy. Uber, an online transportation network, facilitates matching drivers with passengers who need transportation. It emphasizes efficiency and control to keep costs low. If you were a consultant hired to advise Uber, you would suggest that it have structure. Which of the following reasons would you give to support your recommendation to Uber? O Cost leadership strategies ruire strong organizational efficiencies. The functional design is the most efficient, because functions are not duplicated across divisions. O Functional designs enable flexibility in the organization's approach to doing business. O Functional designs are best suited for online businesses Which of the following statements explains the choice of design based on an organization's strategy? O It depends O There is one right answer O Design is mostly independent of strategy.
The organic structure is supported by all four reasons: Decentralized decision making, shorter chains of communication, vertical communication, spans of management. You would suggest that Uber has a functional design.
If you were a consultant hired to advise Cisco Systems, you would suggest that it has an organic structure. This recommendation can be supported by the following reasons:
Decentralized decision making allows for greater flexibility in meeting customer needs.
Shorter chains of command and horizontal communication allow for increased innovation.
Vertical communication flows ensure that decisions are standardized throughout the company.
Narrower spans of management and centralized decision-making offer improved product control.
Uber uses a cost leadership strategy. Uber, an online transportation network, facilitates matching drivers with passengers who need transportation. It emphasizes efficiency and control to keep costs low. If you were a consultant hired to advise Uber, you would suggest that it has a functional design.
This recommendation can be supported by the following reasons:
Cost leadership strategies require strong organizational efficiencies.
Functional designs enable flexibility in the organization's approach to doing business.
The functional design is the most efficient because functions are not duplicated across divisions.
Functional designs are best suited for online businesses.
Therefore, it can be concluded that the choice of design based on an organization's strategy depends. The design of the organization must align with its strategy to ensure that it meets its goals effectively and efficiently.
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Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.50 to determine the bid price. Since our average cost is only $2.435 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart." To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow: Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Required: 1. Perform the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. Perform the first-stage allocation of costs to the activity cost pools. Compute the activity rates for the activity cost pools. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. (Round the "Average Cost per thousand square feet" to 2 decimal places.) a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.
1. First-stage allocation of costs to activity cost pools:
- Estimating: $35,000
- Setup: $70,000
- Routine: $180,000
- Nonroutine: $195,000
- Total costs: $480,000
The first-stage allocation assigns the total costs to the different activity cost pools based on the drivers or factors that cause the costs to be incurred. In this case, the costs are allocated to four activity cost pools: estimating, setup, routine, and nonroutine. The total costs incurred by Mercer Asbestos Removal Company are $480,000.
2. Computation of activity rates for the activity cost pools:
- Estimating: $35,000 / 100 jobs = $350 per job
- Setup: $70,000 / 500 jobs = $140 per job
- Routine: $180,000 / 500 jobs = $360 per job
- Nonroutine: $195,000 / 100 jobs = $1,950 per job
The activity rates are calculated by dividing the total cost of each activity cost pool by the total number of jobs. This gives us the cost per job for each activity.
3. Determination of total cost and average cost per thousand square feet:
a. Routine 1,000-square-foot asbestos removal job:
- Estimating cost: $350
- Setup cost: $140
- Routine cost: $360
- Total cost: $350 + $140 + $360 = $850
- Average cost per thousand square feet: $850 / 1 = $850
b. Routine 2,000-square-foot asbestos removal job:
- Estimating cost: $350
- Setup cost: $140
- Routine cost: $360
- Total cost: $350 + $140 + $360 = $850
- Average cost per thousand square feet: $850 / 2 = $425
c. Nonroutine 2,000-square-foot asbestos removal job:
- Estimating cost: $350
- Setup cost: $140
- Nonroutine cost: $1,950
- Total cost: $350 + $140 + $1,950 = $2,440
- Average cost per thousand square feet: $2,440 / 2 = $1,220
The total cost for each job is calculated by summing the costs from the estimating, setup, and relevant activity cost pool. The average cost per thousand square feet is determined by dividing the total cost by the size of the job in thousands of square feet.
The activity-based costing system provides a more accurate allocation of costs by assigning them to specific activities and drivers. It helps to determine the cost of different types of jobs based on their characteristics. In this case, the average cost per thousand square feet varies for routine and nonroutine jobs, highlighting the difference in cost between the two types of work. This information can be useful in decision-making, pricing, and better understanding the cost structure of asbestos removal jobs for Mercer Asbestos Removal Company.
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