In order for a company to know that system development is progressing as planned and that each set of activities is being completed on schedule, a number of key project management principles must be followed.
The following are the key principles:
1. Clearly define goals and objectives: Before beginning system development, it is important to clearly define the goals and objectives of the project. This can assist the company in establishing project scope, timelines, and criteria for success.
2. Use a project management methodology: There are several project management methodologies to choose from, each with its own advantages and disadvantages. The methodology chosen should be appropriate for the organization's culture, business requirements, and project scope.
3. Establish a project plan: A project plan is a document that outlines the project's scope, timelines, resource allocation, and budget. It's critical to have a project plan to track the project's progress and make sure everything is going according to plan.
4. Implement an effective monitoring system: The monitoring system is a crucial aspect of project management. It helps keep track of the project's progress, identifies any issues early on, and keeps stakeholders informed about the project's progress.
In conclusion, the company will know if the system development is progressing as expected and each set of activities are completed on time if the above key principles are followed and executed effectively.
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As operations manager of Holz Furniture, you must make a decision about adding a line of rustic furniture. Your decision will affect the business performance in the next decision horizon (the next five years). We assume a 16 percent interest rate. In discussing the possibilities with your sales manager, Steve Gilbert, you decide that there will definitely be a market and that your firm should enter that market. However, because rustic furniture has a different finish than your standard offering, you decide you need another process line. There is no doubt in your mind about the decision, and you are sure that you should have a second process. But you do question how large to make it. A large process line is going to cost $400,000; a small process line will cost $300,000. The question, therefore, is the demand for rustic furniture. After extensive discussion with Mr. Gilbert and Tim Ireland of Ireland Market Research, Inc., you determine that the best estimate you can make is that there is a two-out-of-three chance of profit from sales as high as $150,000 per year and a one-out-of-three chance as low as $90,000 per year. With a large process line, you could handle the high figure of $150,000 per year. However, with a small process line you could not and would be forced to expand (at a cost of $120,000), after which time your profit from sales would be $140,000 per year rather than the $150,000 per year because of the lost time in expanding the process. If you do not expand the small process, your profit from sales when the demand is high would be held to $95,000 per year, and $90,000 per year when the demand is low. If you build a small process and the demand is low, you can handle all of the demand. Should you open a large or small process line?
The large process line has a higher net expected profit than the small process line. It, would be more favorable to open a large process line for the rustic furniture. The large process line offers a higher expected profit even though it has a higher initial cost.
To determine whether you should open a large or small process line for the rustic furniture, we need to analyze the expected profits and costs associated with each option.
Let's calculate the expected profits for each scenario and compare the total expected profit for each process line option.
For the large process line;
There is a 2/3 chance of profit of $150,000 per year.
There is a 1/3 chance of profit of $90,000 per year.
Expected profit for the large process line:
= (2/3) × $150,000 + (1/3) × $90,000
= $100,000 + $30,000
= $130,000 per year
For the small process line;
There is a 2/3 chance of profit of $95,000 per year.
There is a 1/3 chance of profit of $90,000 per year.
Expected profit for the small process line;
= (2/3) × $95,000 + (1/3) × $90,000
= $63,333 + $30,000
= $93,333 per year
Now let's compare the costs ;
The large process line costs $400,000.
The small process line costs $300,000 initially, but if you need to expand, it will cost an additional $120,000.
Total costs for the small process line (including expansion cost):
= $300,000 + $120,000
= $420,000
Considering the costs and expected profits, we can make a decision based on the net expected profit (expected profit - costs).
Net expected profit for the large process line:
= $130,000 - $400,000
= -$270,000
Net expected profit for the small process line:
= $93,333 - $420,000
= -$326,667
Comparing the net expected profits, the large process line has a higher net expected profit than the small process line.
Based on this analysis, it would be more favorable to open a large process line for the rustic furniture. The large process line offers a higher expected profit even though it has a higher initial cost.
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Write an executive summary on the concept of strotegic business management to oxplain to your manger what it is you are studying.
Strategic business management is a comprehensive approach that enables organizations to align their goals, resources, and actions to achieve long-term success in a competitive business environment. It involves the formulation and execution of strategies that maximize the organization's strengths, exploit market opportunities, and mitigate risks.
By adopting a strategic business management approach, companies can proactively adapt to changing market dynamics, make informed decisions, and stay ahead of their competitors.
Strategic business management encompasses the systematic analysis of internal and external factors that influence an organization's performance and future prospects. It involves identifying the organization's vision, mission, and values, as well as conducting a thorough analysis of the market, industry trends, customer needs, and competitive landscape.
Based on this analysis, strategic objectives and action plans are formulated to achieve sustainable growth and maintain a competitive advantage.
Strategic business management also involves effective resource allocation, including financial, human, and technological resources, to support the execution of the formulated strategies. It requires continuous monitoring and evaluation of performance metrics to ensure that the organization is on track and making progress towards its strategic goals.
By implementing strategic business management practices, companies can enhance their decision-making capabilities, optimize resource utilization, and navigate the complexities of the business landscape with a long-term perspective.
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Suppose the demand curve for a product is given by
Q=16−2P+1PS
where P is the price of the product and
PS
is the price of a substitute good. The price of the substitute good is
$3.00.
Part 2
Suppose
P=$0.80.
The price elasticity of demand is
enter your response here.
(Enter
your response rounded to two decimal
places.)
The elasticity of demand is a measure of how much the demand for a product varies in response to a change in price. When a product has many close substitutes, it is likely to have a high elasticity of demand. The price elasticity of demand when P = $0.80 is 0.08.
Given data:
Q=16−2P+1PS
PS= $3.00
We are given a demand curve: Q=16−2P+1PS
Q=16−2P+13
Q= (16+3) - 2P
Substituting the value of PS= $3.00
Q=19 - 2P
Now, we have to calculate the price elasticity of demand using the formula:
Price elasticity of demand (Ed) = Percentage change in quantity demanded / Percentage change in price
We are given:
P = $0.80Q = 19 - 2P = 19 - 2(0.80) = 17.40
Now, let's find the new quantity demanded when the price is reduced to 0.70:
Q = 19 - 2
P = 19 - 2(0.70) = 17.60
Percentage change in quantity demanded = (17.60 - 17.40) / 17.50 x 100%
= 1.14%
Now, let's calculate the percentage change in price:
Percentage change in price = (0.80 - 0.70) / 0.75 x 100%
= 13.33%
Therefore, the price elasticity of demand when P = $0.80 is:
Ed = 1.14% / 13.33% = 0.08
The price elasticity of demand when P = $0.80 is 0.08.
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there is no regulation to enforce it. He is concerned that AR and VR are solutions in search of a problem, rather than the other way around. "I don’t see this as enhancing the dialogue between investors and management, because the scarce resource is always the time of management. As a shareholder, I can’t call the CEO of Wesfarmers and talk to him about how he’s going to manage things next year. Is this going to change that? No." Davern sees the most likely application of AR and VR in aspirational and narrative reporting – and most likely to put a "shiny spin" on what is coming next rather than provide substantial information. The UK FRC agrees in its report – AR and VR work best when used to enhance understanding of intangible aspects, and for a wider audience than time or distance usually allow. A time yet to come While we already walk around with augmented reality devices in our pockets, the technology’s widespread adoption is still some years away. The FRC concludes that corporate reporting will fully turn towards AR and VR in five to 10 years. "The ability for VR and AR to bridge between the physical and the digital gives it a useful role in supporting and building understanding about a company, its business model and its operations at a distance and scale," the report says. "VR and AR need to overcome several regulatory, cost and user challenges before they become a key mechanism for company reporting." CPA LIBRARY The Routledge Handbook of Integrated Reporting. Read now.How AR and VR will affect audit The most promising crossover between AR and VR and audit is the site visit. Site visits can take up a lot of time, are expensive and are difficult to do when travel is restricted. Johnny Lam CPA sees a strong argument for AR and VR in stocktakes, for example. PwC Hong Kong may deploy as many as 20 staff on one project in Mainland China, and it can take a day of travel simply to get to some of the more remote factories. "Maybe, with VR, I can send two staff with a camera to look at the whole facility and ensure that what I see in the ‘virtual reality’ is the same in the real world," Lam says. Then, his colleagues could do the stocktake from their office rather than onsite. It is a similar story for financial or operational due diligence. Lam has a client with a construction site in South Asia, but he can’t send staff there because of COVID-19 restrictions. The big question is who controls the camera, says Professor Michael Davern CPA. "Is there some assurance or authenticity? Does the auditor get to ‘drive’ and say, ‘I want to look in this direction’? Then, how do you protect staff privacy or not reveal your trade secrets? "We still need to work out what the processes are that wrap around these new technologies, and how you audit and manage that disclosure." Tyler Wise CPA, director of Wise Accounting, says before auditors jump onto AR and VR, they could look to other technologies that have the potential to improve audit. "I look forward to blockchain, with immutable data," Wise says. "You would know exactly what is in there, and it can’t be altered. "As to when AR and VR would be used in the corporate world, it feels so far away."
question;
a. find the link between the case and the concept of accountability
The link between the case and the concept of accountability lies in the discussion of how AR (Augmented Reality) and VR (Virtual Reality) technologies can impact corporate reporting and auditing.
Accountability refers to the responsibility of an individual or organization to provide an explanation or justification for their actions and decisions.
In the case, the concern raised by the interviewees, including the shareholder and the UK FRC (Financial Reporting Council), is that AR and VR might not enhance the dialogue between investors and management or provide substantial information.
There is skepticism about whether these technologies will truly enhance accountability in corporate reporting.
The case highlights the potential use of AR and VR in aspirational and narrative reporting, which may present a "shiny spin" on future plans rather than providing concrete and transparent information.
This raises questions about the authenticity and assurance of the content presented through these technologies and whether they truly contribute to accountability in corporate communication.
Additionally, the case discusses the potential application of AR and VR in audit processes, particularly in site visits and stocktakes. These technologies could potentially improve efficiency and reduce costs associated with physical site visits.
However, questions are raised about who controls the camera, the authenticity of the virtual experience, and the privacy and protection of sensitive information during the auditing process. These concerns highlight the importance of maintaining accountability and ensuring the integrity and reliability of audit procedures.
Overall, the case raises questions about how AR and VR technologies align with the concept of accountability in corporate reporting and auditing.
It emphasizes the need to carefully consider the processes, regulations, and ethical considerations surrounding these technologies to ensure that they effectively contribute to transparency, trust, and accountability in the business environment.
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You are involved in an investigation of charges that a large university in a small town is discriminating against female employees. You find that the salaries for professors in the nearly all-female School of Social Work are 20% below average salaries paid to those of comparable rank elsewhere in the university. Is this university exhibiting behavior associated with employer discrimination?
Yes, the university is exhibiting behavior associated with employer discrimination .Further investigation and analysis would be needed to fully confirm and address the discrimination allegations, including evaluating the factors contributing to the salary differences and determining if there are any legitimate non-discriminatory reasons for the disparity.
The fact that the salaries for professors in the School of Social Work, which is predominantly female, are 20% below average salaries paid to professors of comparable rank in other departments suggests a gender-based wage disparity. This discrepancy raises concerns about possible gender discrimination within the university's compensation practices.
Gender-based wage disparities can be indicative of discriminatory practices, where women are systematically paid less than their male counterparts for equal work. In this case, the salary difference between the School of Social Work and other departments suggests that female professors in the social work department are being paid less due to their gender, which is a form of employer discrimination.
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Internal Insights Inc., a developer of radiology equipment, has stock outstanding as follows: 13,000 shares of cumulative preferred 3% stock, $140 par, and 43,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $36,530; second year, $82,670; third year, $103,960; fourth year, $131,140.
Compute the dividend per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, leave it blank.
For each of the four years, the dividend per share for each class of stock is as follows:
Cumulative Preferred 3% Stock:
First year: $2.81
Second year: $6.36
Third year: $7.99
Fourth year: $10.09
Common Stock:
First year: $0.85
Second year: $1.93
Third year: $2.42
Fourth year: $3.05
To compute the dividend per share on each class of stock for each of the four years, we'll need to divide the total dividend amount by the number of shares for each class of stock.
Cumulative Preferred 3% Stock:
Total dividend amount for the first year: $36,530
Number of shares of cumulative preferred stock: 13,000
Dividend per share for the first year: $36,530 / 13,000 shares = $2.81
Total dividend amount for the second year: $82,670
Number of shares of cumulative preferred stock: 13,000
Dividend per share for the second year: $82,670 / 13,000 shares = $6.36
Total dividend amount for the third year: $103,960
Number of shares of cumulative preferred stock: 13,000
Dividend per share for the third year: $103,960 / 13,000 shares = $7.99
Total dividend amount for the fourth year: $131,140
Number of shares of cumulative preferred stock: 13,000
Dividend per share for the fourth year: $131,140 / 13,000 shares = $10.09
Common Stock:
Total dividend amount for the first year: $36,530
Number of shares of common stock: 43,000
Dividend per share for the first year: $36,530 / 43,000 shares = $0.85
Total dividend amount for the second year: $82,670
Number of shares of common stock: 43,000
Dividend per share for the second year: $82,670 / 43,000 shares = $1.93
Total dividend amount for the third year: $103,960
Number of shares of common stock: 43,000
Dividend per share for the third year: $103,960 / 43,000 shares = $2.42
Total dividend amount for the fourth year: $131,140
Number of shares of common stock: 43,000
Dividend per share for the fourth year: $131,140 / 43,000 shares = $3.05
Therefore, for each of the four years, the dividend per share for each class of stock is as follows:
Cumulative Preferred 3% Stock:
First year: $2.81
Second year: $6.36
Third year: $7.99
Fourth year: $10.09
Common Stock:
First year: $0.85
Second year: $1.93
Third year: $2.42
Fourth year: $3.05
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Investment X offers to pay you $5,600 per year for 9 years, whereas Investment Y offers to pay you $8,200 per year for 5 years. If the discount rate is 4 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) If the discount rate is 14 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) An investment offers $6,200 per year, with the first payment occurring one year from now. The required return is 7 percent. a. What would the value be today if the payments occurred for 20 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be today if the payments occurred for 45 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be today if the payments occurred for 70 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be today if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If you put up $47,000 today in exchange for a 6.75 percent, 14-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Your company will generate $66,000 in annual revenue each year for the next seven years from a new information database. If the appropriate discount rate is 8.50 percent, what is the present value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The present value of the cash flows would be $38,4243.18 (rounded to 2 decimal places).
To calculate the present value of the cash flows for Investment X and Y, we can use the formula:
PV = CF/(1+r)^n
where PV is the present value, CF is the cash flow for each year, r is the discount rate, and n is the number of years.
For Investment X:
PV = 5600/(1+0.04)^1 + 5600/(1+0.04)^2 + ... + 5600/(1+0.04)^9
PV = 49795.06
For Investment Y:
PV = 8200/(1+0.04)^1 + 8200/(1+0.04)^2 + ... + 8200/(1+0.04)^5
PV = 35174.46
At a discount rate of 14 percent:
For Investment X:
PV = 5600/(1+0.14)^1 + 5600/(1+0.14)^2 + ... + 5600/(1+0.14)^9
PV = 37300.20
For Investment Y:
PV = 8200/(1+0.14)^1 + 8200/(1+0.14)^2 + ... + 8200/(1+0.14)^5
PV = 31472.71
For the investment that pays $6,200 per year with a required return of 7 percent:
a. For 20 years:
PV = 6200 [(1 - (1/1.07^20)) / 0.07]
PV = 79223.18
b. For 45 years:
PV = 6200 [(1 - (1/1.07^45)) / 0.07]
PV = 150906.28
c. For 70 years:
PV = 6200 [(1 - (1/1.07^70)) / 0.07]
PV = 229314.53
d. Forever:
PV = CF/r
PV = 6200/0.07
PV = 88571.43
If you put up $47,000 today in exchange for a 6.75 percent, 14-year annuity, the annual cash flow will be:
CF = PV/r
CF = 47000/(1-1/1.0675^14)
CF = 5259.03
For a company that generates $66,000 in annual revenue each year for the next seven years from a new information database:
PV = 66000/(1+0.085)^1 + 66000/(1+0.085)^2 + ... + 66000/(1+0.085)^7
PV = 384243.18
Therefore, the present value of the cash flows would be $38,4243.18 (rounded to 2 decimal places).
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Linear programming is used in the predication of capacity, through maximization of revenue and minimization of cost of capacity provision as an effective operations strategy. (a) State and briefly explain Four (4) requirements of a Linear Programming (LP) problem
Four requirements of a Linear Programming (LP) problem are Objective Function; Constraints; Linearity; Non-negativity.
1. Objective Function: A linear programming problem must have a well-defined objective function that represents the goal of the problem. This function can be either maximized or minimized, depending on the problem's requirements.
2. Constraints: LP problems have a set of constraints that define the limitations or restrictions on the variables. These constraints restrict the feasible solutions to the problem.
3. Linearity: In linear programming, both the objective function and the constraints must be linear functions. This means that the variables involved in these functions have an exponent of 1 and are not multiplied or divided together.
4. Non-negativity: LP problems assume that the variables involved are non-negative, meaning they cannot have negative values. This assumption simplifies the problem and aligns with real-world scenarios where variables such as quantities, prices, or production levels cannot be negative.
By satisfying these four requirements, a linear programming problem can be effectively formulated and solved to find optimal solutions that maximize or minimize the objective function while respecting the given constraints.
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A firm generated net income of AED 15 million. Accounts payables decreased by AED 7 million, accounts receivables decreased by AED 12, inventory decreased by AED 15, and beginning balance of fixed assets was AED 60 million and became AED 50 million(net fixed assets). There was no interest expense. What was the net cash flow from operating activity?
The net cash flow from operating activity is AED 9 million.The net cash flow from operating activity is the cash that comes in and goes out in the daily operations of a firm.
It represents the amount of money generated by a company's core business activities, such as selling goods or providing services, and is reported on the statement of cash flows. To calculate the net cash flow from operating activity, you need to begin with the net income figure and adjust it for any non-cash expenses that were included in the net income and any changes in working capital accounts such as accounts payable, accounts receivable, and inventory.
Here's how to calculate the net cash flow from operating activity:
Net Income = AED 15 million
Add: Depreciation Expense = AED 10 million (60 - 50) = AED 10 million
Changes in Working Capital:- Increase in Accounts Payable = (AED 7 million)- Decrease in Accounts Receivable
= AED 12 million- Decrease in Inventory
= AED 15 million= (AED 34 million)
Net Cash Flow from Operating Activity
= Net Income + Depreciation Expense + Changes in Working Capital
= AED 15 million + AED 10 million - AED 34 million= (AED 9 million)
Therefore, the net cash flow from operating activity is AED 9 million.
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The price discovery is the process of uncovering the fundamental value of the asset through the interactions of buyers and sellers. Certain previous research shows that preopening price discovery process is noisy and a gradual process. Consider a call auction to set an opening price where traders place but can cancel market or limit orders as a benchmark economy. Consider alternative call mechanisms with 1) no cancellation, 2) frequent clearings before the market opens, and 3) a random clearing time. Assume that a there are many informed and uninformed traders, who can trade a single risky stock at a call auction. Suggest which call mechanism generates faster convergence to the price efficiency than the benchmark economy. Provide an economic story (how the informed and uninformed traders make order choices) for your answer. Explain how your economic story and market consequence change when all traders do and do not learn the fundamental price of the asset.
In the benchmark economy where traders can place and cancel market or limit orders in a call auction, the price discovery process may be noisy and gradual. To achieve faster convergence to price efficiency, an alternative call mechanism with frequent clearings before the market opens would be more effective.
In this alternative mechanism, traders would not be allowed to cancel their orders, leading to a more stable and consistent order flow. Informed traders, who possess private information about the fundamental value of the asset, would strategically submit their orders based on their beliefs.
They would aim to reveal their information gradually, increasing the chances of their orders being executed at favorable prices. Uninformed traders, lacking private information, would observe the order flow and adjust their own orders accordingly.
With frequent clearings, the market would receive more frequent updates on the order book and executed trades. This would facilitate the incorporation of new information into the market price, leading to faster convergence to price efficiency.
When all traders learn the fundamental price of the asset, the economic story changes. Informed traders would no longer need to strategically submit their orders to reveal information gradually. Instead, they would immediately trade at the fundamental price, reducing the need for a call auction.
Uninformed traders would also adjust their orders based on the fundamental price, resulting in more efficient and rapid price convergence.
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Analyze the 15-year, 6% coupon rate (semiannual payment), $1,000 par value bond. The bond currently sells for $1,218. What’s the bond’s yield to maturity?
A. 4.66%
B. 3.95%
C. 5.08%
D. 4.05%
The yield to maturity is 4.66%. Option A is correct.
Given data is, Face value (par value) of the bond = $1,000, The annual coupon payment = 6% of $1,000 = $60, Semi-annual coupon payment = $60/2 = $30, The bond maturity = 15 years, The current price of the bond = $1,218.
The yield to maturity is the discount rate which sets the present value of all future cash flows of the bond equal to its current market price.
Using the formula of calculating yield to maturity, we get:
$1,218 = $30 × (1 - 1/(1 + i)^30)/i + $1,000/(1 + i)^30,where
i is the semi-annual interest rate.Using the financial calculator or the software to solve the above equation, we get the semi-annual interest rate i = 2.33%. So the annual interest rate or the yield to maturity:
= 2 × 2.33% = 4.66%Therefore, the yield to maturity is 4.66% (option A).
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Describe the impact of
political behaviors in your Busi subject team considering both
individual and organizational antecedents
The impact of political behaviors within a business subject team can be significant, affecting both individuals and the overall organization. Political behaviors refer to actions and strategies individuals employ to gain power, influence, and control within the team. These behaviors can include manipulation, favoritism, information withholding, and forming alliances.
At the individual level, political behaviors can create a toxic work environment. Employees may experience increased stress, decreased job satisfaction, and diminished trust in their colleagues. This can lead to reduced productivity, increased turnover, and a decline in overall team morale. Moreover, individuals may feel the need to engage in similar political behaviors to protect their own interests, perpetuating a cycle of negative behavior.
Organizational antecedents, such as a competitive culture, lack of clear communication channels, and ambiguous decision-making processes, can contribute to the prevalence of political behaviors. When these factors are present, individuals may resort to political strategies as a means of securing resources, advancing their careers, or protecting themselves from perceived threats.
In conclusion, political behaviors within a business subject team can have detrimental effects on both individuals and the organization as a whole. It is crucial for organizations to foster a culture of transparency, open communication, and fairness to mitigate the negative impact of political behaviors. By promoting a positive work environment, organizations can enhance collaboration, trust, and overall team effectiveness.
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In your own words please discuss if accountants should be concerned with the timing and the recording of purchases and what ethical standards, if any, may be violated.
Accountants should exercise diligence and integrity in ensuring the timely and accurate recording of purchases, aligning with ethical standards to provide reliable financial information to stakeholders.
Yes, accountants should be concerned with the timing and recording of purchases. Properly recording purchases is crucial for accurate financial reporting and ensuring compliance with accounting standards. The timing of recording purchases impacts the accuracy of financial statements, as it affects the matching principle, which states that expenses should be recognized in the same period as the related revenues. Accountants need to ensure that purchases are recorded in the correct accounting period to provide an accurate picture of the company's financial performance.
Ethical standards can come into play when it comes to the timing and recording of purchases. One potential ethical concern is the deliberate manipulation of purchase timing to achieve specific financial outcomes. For example, delaying purchases until a later accounting period to inflate profits or meet performance targets can be unethical and misleading. This practice, known as "window dressing," can misrepresent the true financial position of a company and deceive stakeholders.
Another ethical consideration is the accurate recording of purchase transactions. Accountants should adhere to the principles of transparency, accuracy, and completeness when recording purchases. Failure to record purchases accurately or deliberately misrepresenting purchase amounts or details can violate ethical standards such as integrity, objectivity, and professional behavior.
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Baker Industries' net income is $27,000, its interest expense is $6,000, and its tax rate is 40%. Its notes payable equals $26,000, long-term debt equals $80,000, and common equity equals $260,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations. ROE ROIC
Baker Industries' ROE is approximately 10.38% and its ROIC is approximately 9.76%. These measures provide insights into the firm's profitability and efficiency in generating returns for its shareholders and capital providers.
To calculate the Return on Equity (ROE) and Return on Invested Capital (ROIC) for Baker Industries, we need to use the following formulas: ROE = Net Income / Average Total Equity
ROIC = (Net Income - After-Tax Interest Expense) / Average Total Capital First, let's calculate the Average Total Equity: Average Total Equity = (Beginning Equity + Ending Equity) / 2 Since we only have the ending equity information, we can use it directly.
Average Total Equity = $260,000 Next, we need to calculate the Average Total Capital: Average Total Capital = Average Total Debt + Average Total Equity
To calculate the Average Total Debt, we need the beginning and ending debt values. However, the problem statement only provides the current values, so we assume that there were no changes in debt during the period.
Average Total Debt = (Beginning Debt + Ending Debt) / 2 = ($26,000 + $26,000) / 2 = $26,000 Now, we can calculate the ROE: ROE = Net Income / Average Total Equity = $27,000 / $260,000 ≈ 0.1038 or 10.38%
Finally, we can calculate the ROIC:ROIC = (Net Income - After-Tax Interest Expense) / Average Total Capital = ($27,000 - ($6,000 * (1 - 0.40))) / ($26,000 + $260,000) ≈ 0.0976 or 9.76%
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We have so far assumed that the seller has a single good for sale. Suppose instead that the seller has two identical goods for sale. Further, assume that even though there are two identical goods for sale, each bidder wishes to win just one of them (he doesn't care which one, since they are identical). There are N bidders and each bidder's single value, v, for either one of the goods is drawn independently from [0,1] according to the common density function f(⋅). So, if a bidder's value happens to be V=1/3, he is willing to pay at most 1/3 to receive one of the two goods. Suppose that the seller employs the following auction to sell the two goods. Each bidder is asked to submit a sealed bid. The highest two bids win and the two winners each pay the third-highest bid. Losers pay nothing. (a) Argue that a bidder can do no better in this auction than to bid his value. (b) Find an expression for the seller's expected revenue. You may use the fact that the density, g(v), of the third-highest value among the N bidder values is g(v)=61N(N−1)(N−2)f(v)(1− F(v))2FN−3(v).
(a) A bidder can do no better in this auction than to bid his value. A bidder can do no better in this auction than to bid his value because this auction is a Dutch auction.
(a) A bidder can do no better in this auction than to bid his value. A bidder can do no better in this auction than to bid his value because this auction is a Dutch auction.
This means that the price of the two goods starts high and decreases until two bidders are willing to buy. The price that the two bidders pay is the price that the third-highest bidder bid. Suppose a bidder has a valuation of v. If he bids anything less than v, he will either lose out to higher bidders or will win and pay less than his valuation, neither of which is desirable for him.
If he bids more than v, he will win but pay more than his valuation, which is also not desirable. Therefore, a bidder can do no better in this auction than to bid his value.
(b) An expression for the seller's expected revenue:
The revenue generated by this auction can be derived by examining the cases of how the third-highest bid was generated. There are two possibilities for how this could have occurred:
1) it could have come from one of the bidders who wins, or
2) it could have come from one of the bidders who loses.(1) If the third-highest bid comes from one of the bidders who wins, then each of the two winning bidders pays the third-highest bid, and the seller's revenue is twice this value. The probability of this happening is given by the probability that the third-highest bid comes from one of the bidders who wins and the other winning bidder bids higher.
There are two winning bids and N-2 losing bids, so this probability is (N-2)g(v)F(v)N-3(v)^2.(2)
If the third-highest bid comes from one of the bidders who loses, then the seller receives no revenue from that bid. The probability of this happening is given by the probability that the third-highest bid comes from one of the bidders who loses and the other two winning bidders bid higher.
There are N-2 losing bids, so this probability is (N-2)g(v)(1-F(v))N-3(v)^2.
Since each of the two winning bidders must pay the third-highest bid, the expected revenue for the seller is the sum of these two cases. Therefore, the seller's expected revenue is given by the following integral:
R = ∫0^1 2v(N-2)g(v)F(v)N-3(v)^2 dv + ∫0^1 0(N-2)g(v)(1-F(v))N-3(v)^2 dv
By substituting the density function of g(v), we get;
R=2∫061(N−1)(N−2)f(v)vF(v)N−3(v)2 dv+0∫061(N−1)(N−2)f(v)(1−F(v))N−3(v)2dv= 2/3(N-1)/(N-2)
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Can I get research analysis on the consumption pattern of Indian consumer for mass chocolate and premium chocolate.What are the trigger and barriers for Indian consumer opting for premium chocolate.And what the occasion where do they consume premium chocolate,and some consumer insights related to what do Indian consumer like in premium chocolate,why do they buy it,what purchasing factors do they have in mind when purchase premium chocolate.
Also if they would go for a premium chocolate like Godiva and why or why not,what could be the possible reasons for it.
How do consumer perceive premium brand in India and how would they perceive Godiva chocolate in india.
What differentiates a mass consumer to premium chocolate consumer,apart from price.
Premium chocolate consumers have a higher disposable income and are willing to spend more money on luxury goods.
Consumption pattern of Indian consumers for mass chocolate and premium chocolateIndian consumers are the world's largest consumers of chocolate. The chocolate industry in India has grown substantially over the last decade, with a rising middle class and a shift in consumer preferences from traditional sweets to chocolates.
There is a significant difference in the consumption pattern of mass chocolate and premium chocolate among Indian consumers. Indian consumers prefer mass-produced chocolates over premium chocolates. The primary reason behind this is the price factor, as premium chocolates are expensive compared to mass-produced chocolates. Consumers are hesitant to spend more money on premium chocolates because they consider it an occasional luxury, not an everyday indulgence. As a result, consumers prefer to buy mass-produced chocolates that are more affordable and have a broader product range. Trigger and barriers for Indian consumers opting for premium chocolateThe primary triggers for Indian consumers opting for premium chocolate are gift-giving, personal indulgence, and celebrating special occasions like birthdays, weddings, and festivals. The primary barriers for Indian consumers when it comes to buying premium chocolate are price, lack of awareness about the product, and availability in the market. Consumer insights related to what Indian consumers like in premium chocolateIndian consumers prefer chocolate that is rich in flavour has a smooth texture and is visually appealing. Consumers also prefer chocolates that have a high cocoa content, and natural ingredients, and are free from preservatives. Purchasing factors that Indian consumers keep in mind while buying premium chocolate When purchasing premium chocolate, Indian consumers keep the following factors in mind:
PriceQualityBrandReputationIngredientsAvailability: If they would go for premium chocolate like Godiva and why or why not, what could be the possible reasons for itIndian consumers are not aware of the Godiva brand, which is relatively new to the Indian market. Godiva is a premium chocolate brand, and consumers in India may not be willing to pay a high price for it. Therefore, Godiva may not have a significant market in India as consumers prefer locally-produced chocolates over imported brands. How do consumers perceive premium brands in India and how would they perceive Godiva chocolate in IndiaIndian consumers perceive premium brands as a luxury and a status symbol. Premium brands are associated with quality, elegance, and exclusivity. If Godiva is marketed as a luxury brand, it may appeal to Indian consumers. However, consumers in India prefer locally produced chocolates, and Godiva may not have a significant market in India. What differentiates a mass consumer from a premium chocolate consumer, apart from priceThe primary difference between mass consumers and premium chocolate consumers is purchasing power. Premium chocolate consumers have a higher disposable income and are willing to spend more money on luxury goods. Mass consumers, on the other hand, are more price-sensitive and are looking for affordable products.
Indian consumers prefer mass-produced chocolates over premium chocolates due to price, lack of awareness, and availability. When it comes to purchasing premium chocolate, Indian consumers keep in mind factors such as price, quality, brand, reputation, ingredients, and availability. Godiva, being a relatively new brand in the Indian market, may not have a significant market share due to its high price and competition from local chocolate brands. Premium chocolate consumers have a higher disposable income and are willing to spend more money on luxury goods.
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1. What are the biggest challenges you'll face in a job interview conducted remotely? Why? What can you do to prepare to meet those challenges? 2. Are there any upsides to interviewing remotely? What are those? 3. In what ways have you developed your professional network? What steps you can take to broaden your professional network?
1. The biggest challenges one can face in a remote job interview are the lack of face-to-face interaction, technical issues, time zone differences, and lack of nonverbal cues.
You need to make sure you are adequately prepared and have the necessary equipment (computer, microphone, and camera) before the interview. You should test your audio and camera settings beforehand, and ensure that your internet connection is stable. You should also dress professionally and select a quiet location where you won't be disturbed during the interview.
2. One of the upsides to interviewing remotely is the convenience factor. You can participate in the interview from anywhere, as long as you have an internet connection. It saves time and money as you don't have to travel. You can also showcase your technical skills as the interview is conducted online.
3. Professional networking helps you to expand your knowledge and skills, and it can help you to build relationships with individuals in your industry. I have developed my professional network through various ways such as attending industry events, joining professional associations, volunteering in organizations, participating in online forums, and connecting with people on social media platforms like Linkedln.
To broaden your professional network, you can engage with industry leaders and influencers on social media, attend conferences and seminars, participate in webinars and online events, and seek out mentors who can help guide you in your career.
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Problem 14-4 Estimating the DCF Growth Rate [LO1]
Suppose Stark Ltd. just issued a dividend of $1.85 per share on its common stock. The company paid dividends of $1.50, $1.59, $1.66, and $1.77 per share in the last four years.
If the stock currently sells for $45, what is your best estimate of the company’s cost of equity capital using the arithmetic average growth rate in dividends? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Cost of equity %
What if you use the geometric average growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Cost of equity %
Cost of equity using arithmetic average growth rate = 13.14%
Cost of equity using geometric average growth rate = 12.86%.
Here is a Step-by-Step Explanation:
We have here,
Dividend for last 4 years: $1.50, $1.59, $1.66, and $1.77
Dividend just issued: $1.85
Price of stock currently: $45To estimate the cost of equity capital,
the following formula is used:
Cost of Equity Capital (Ks) = (Dividend / Current Market Price of Stock) + Growth Rate
Cost of Equity Capital using the arithmetic average growth rate:
Average growth rate can be calculated as follows:
Arithmetic Average Growth Rate = [(Dividend in latest year – Dividend in oldest year) / Number of years] / Dividend in oldest year
Arithmetic Average Growth Rate = [(1.77 - 1.50) / 3] / 1.50
Arithmetic Average Growth Rate = 0.0444 or 4.44%
Therefore, the cost of equity capital is:
Cost of Equity Capital (Ks) = (1.85 / 45) + 0.0444
Cost of Equity Capital (Ks) = 0.087 + 0.0444
Cost of Equity Capital (Ks) = 0.1314 or 13.14% (Answer)
Cost of Equity Capital using the geometric average growth rate:
Geometric Average Growth Rate can be calculated as follows:
Geometric Average Growth Rate = [(Dividend in latest year / Dividend in oldest year) ^ (1 / Number of years)] – 1
Geometric Average Growth Rate = [(1.77 / 1.50) ^ (1 / 3)] - 1
Geometric Average Growth Rate = 0.0416 or 4.16%
Therefore, the cost of equity capital is:
Cost of Equity Capital (Ks) = (1.85 / 45) + 0.0416
Cost of Equity Capital (Ks) = 0.087 + 0.0416
Cost of Equity Capital (Ks) = 0.1286 or 12.86% (Answer)
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.What is a flexible budget and how does it differ from a static or more traditional budget
How can responsibility center accounting help to focus the attention of managers and employees on the more important issues?
By word
A flexible budget is a financial plan that adjusts for changes in activity levels or volume. It differs from a static or traditional budget, which remains fixed regardless of actual activity levels.
A flexible budget is more dynamic and adaptable, allowing for better decision-making and performance evaluation as it reflects the varying levels of activity and their impact on costs and revenues.
Responsibility center accounting helps focus the attention of managers and employees on important issues by providing a framework for assigning responsibilities and measuring performance.
It involves categorizing different areas or departments within an organization as responsibility centers, such as cost centers, profit centers, or investment centers. Each responsibility center is accountable for specific goals and objectives.
By implementing responsibility center accounting, managers and employees are encouraged to take ownership and be accountable for their assigned responsibilities.
It allows for better monitoring and evaluation of performance, as results can be measured against specific targets. This helps identify areas of strength and weakness, facilitates decision-making, and promotes a focus on the key drivers of success.
Overall, both flexible budgets and responsibility center accounting contribute to better decision-making, performance evaluation, and alignment of goals within an organization. They provide a more nuanced and comprehensive approach to financial planning and management, enhancing the overall effectiveness and efficiency of an organization's operations.
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Deer Manufacturing produces 4 different types of wood paneling.
Each type of paneling is made by gluing and pressing together a
different mixture of pine and oak chips. The following table
summarizes
Deer Manufacturing produces four types of wood paneling, each made from a unique combination of pine and oak chips.
The table provides a summary of these mixtures. The company likely uses these different compositions to produce wood paneling with varying characteristics, similar as color, endurance, and cost. By clinging and pressing together these mixtures, Deer Manufacturing can produce a range of paneling options to feed to different client preferences and market demands.
This approach allows them to offer different products that can be used in various operations, similar as flooring, walls, and cabinetwork, providing customers with a choice of wood paneling options suitable for their specific requirements.
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Gross Operating Income refers to base rent and miscellaneous income after an allowance is made for vacancy.
True / False
Gross Operating Income refers to base rent and miscellaneous income after an allowance is made for vacancy - true.
Gross Operating Income or GOI is a significant measure for real estate investors. GOI refers to the amount of income generated from a property that is utilized for operation and maintenance before deducting any operating expenses. This amount is calculated after allowing a vacancy allowance, which means the lost revenue due to vacant spaces in the property.
GOI includes base rent and miscellaneous income such as parking fees, vending machines, laundry machines, and any other income generated from the property. Therefore, the statement "Gross Operating Income refers to base rent and miscellaneous income after an allowance is made for vacancy" is true.
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Describe your last interaction with a salesperson, customer representative, or similar. Did they create value for the product they were selling? How?
In my last interaction with a Salesperson, they indeed created value for the product they were selling. The representative demonstrated excellent product knowledge, provided personalized recommendations, and addressed my concerns effectively.
Through their expertise and understanding of my needs, they highlighted the unique features and benefits of the product, emphasizing how it would meet my requirements and enhance my experience. They also offered additional resources and support, such as a comprehensive user guide and prompt customer service, which added value to the overall purchase.
During the interaction, the customer representative actively listened to my requirements and concerns, allowing them to tailor their recommendations accordingly. They provided detailed explanations and demonstrations, highlighting the product's key features and how they would specifically address my needs.
By doing so, they helped me understand the value proposition of the product and how it would solve my challenges or enhance my lifestyle. Their commitment to customer satisfaction and willingness to go the extra mile in providing resources and support further solidified the value of the product and ensured a positive buying experience.
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1. On October 1, Organic Farming purchases wind turbines for $270,000. The wind turbines are expected to last six years, have a salvage value of $33,000, and be depreciated using the straight-line method. 1. Compute depreciation expense for the last three months of the first year. 2. Compute depreciation expense for the second year.
straight line depreciation for the last three months of first year
straight line depreciation for the second year
2. A company has net sales of $2,200,000 and average accounts receivable of $440,000. What is its accounts receivable turnover for the period?
The straight-line method of depreciation evenly allocates the cost of an asset over its useful life.Under the straight-line method, the depreciation expense is evenly distributed over the asset's useful life.
1. To compute depreciation expense for the last three months of the first year and for the second year using the straight-line method, we need to determine the annual depreciation first.
Annual depreciation = (Cost - Salvage Value) / Useful Life
Given:
Cost = $270,000
Salvage Value = $33,000
Useful Life = 6 years
Annual depreciation = ($270,000 - $33,000) / 6
Annual depreciation = $237,000 / 6
Annual depreciation = $39,500
a) Depreciation expense for the last three months of the first year:
Since the useful life is six years, the first year would cover nine months (3/12 * 6 years).
Depreciation expense for the last three months of the first year = Annual depreciation * (3/12)
Depreciation expense for the last three months of the first year = $39,500 * (3/12)
Depreciation expense for the last three months of the first year = $9,875
b) Depreciation expense for the second year:
Depreciation expense for each year would be the same, so it will be equal to the annual depreciation.
Depreciation expense for the second year = Annual depreciation = $39,500
2. To calculate the accounts receivable turnover, we use the following formula:
Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Given:
Net Sales = $2,200,000
Average Accounts Receivable = $440,000
Accounts Receivable Turnover = $2,200,000 / $440,000
Accounts Receivable Turnover = 5
Therefore, the accounts receivable turnover for the period is 5.
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Customer value is defined as what a customer __________.
Group of answer choices
believes is the best deal for a product or service
is willing to pay for a product or service
prefers based on characteristics such as usefulness and quality
believes other customers are paying for a product or service
Customer value is defined as what a customer believes is the best deal for a product or service.
It is essential to understand that customer value is relative, subjective, and situational.It is the customer's perception of the product's benefits relative to the price. The customer's perception of the value of the product or service is the primary factor influencing their purchase decision and long-term loyalty.
A customer usually perceives value by comparing the benefits of a product or service to the price. The benefits include the product or service's quality, the level of service, the brand image, and the availability of financing or other incentives.
It is important to keep in mind that the perceived value of the customer is dynamic and changes with time, location, customer preferences, and other factors that influence the buying process.The term "value" in this context can be defined as the overall satisfaction the customer derives from a product or service in relation to the price they paid. It can also be interpreted as the difference between the benefits and the cost of the product or service.
The importance of customer value lies in its ability to influence customer loyalty and retention, price sensitivity, and willingness to pay more for premium products or services. In conclusion, understanding customer value is essential for any business that aims to meet or exceed customers' expectations, maintain market share, and increase revenue. A satisfied customer is the best marketing tool, and investing in customer value should be a top priority for any business.
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A retail store establishes a delivery network using a 3rd party. However the delivery cost is too high and delayed most of the time. Which of the three A's in a supply chain is lacking? O Agility Adaptability O Alignment O All of the above
The answer is "Alignment." Alignment refers to the coordination and synchronization of activities and goals across different entities in the supply chain.
In this case, the retail store's delivery network using a 3rd party is facing high costs and frequent delays. This suggests a lack of alignment between the retail store and the delivery service provider. To achieve effective supply chain management, it is crucial for all entities involved in the supply chain to align their objectives, strategies, and operations. This alignment ensures smooth coordination and cooperation among the parties, resulting in efficient and cost-effective delivery services.
If the delivery costs are too high and delays are frequent, it indicates a misalignment between the retail store's expectations and the capabilities or service level provided by the third-party delivery network. By improving alignment, the retail store can work closely with the delivery service provider to address cost issues, improve delivery performance, and enhance overall customer satisfaction.
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Consider a utility function for the following form, U=4x+2y. Assume that the price of x is equal to $3, the price of y is equal to $2 and income is equal to 30.
Enter the number for the optimal amount of x that this person should consume?
Enter the number for the optimal amount of y that this person should consume?
To determine the optimal consumption of x and y based on the given utility function, prices, and income, we can use the concept of utility maximization.
The utility maximization condition states that the marginal utility per dollar spent on each good should be equal. Given the utility function: U = 4x + 2y
Price of x: $3
Price of y: $2
Income: $30
To find the optimal consumption of x and y, we need to equate the marginal utility per dollar spent on each good:
Marginal Utility of x / Price of x = Marginal Utility of y / Price of y
The marginal utility of a good is the derivative of the utility function with respect to that good.
Taking the derivative of the utility function U with respect to x, we get:
dU/dx = 4
Taking the derivative of the utility function U with respect to y, we get:
dU/dy = 2
Now, let's calculate the marginal utility per dollar spent on each good:
Marginal Utility per Dollar for x = (dU/dx) / (Price of x)
= 4 / 3
Marginal Utility per Dollar for y = (dU/dy) / (Price of y)
= 2 / 2
= 1
Since the marginal utility per dollar spent on x is greater than the marginal utility per dollar spent on y, the consumer should allocate more of their income to x.
To determine the optimal consumption, we need to find the quantity of x and y that exhausts the entire income while satisfying the marginal utility condition.
Let's assume the optimal quantity of x is represented by 'x_optimal' and the optimal quantity of y is represented by 'y_optimal.'
Given that income is $30, we have the following equation:
Price of x * x_optimal + Price of y * y_optimal = Income
Substituting the values:
$3 * x_optimal + $2 * y_optimal = $30
Since we have only one equation and two unknowns, we cannot determine the exact values of x_optimal and y_optimal. However, we can find one possible combination that satisfies the equation. Let's assume x_optimal = 5:
$3 * 5 + $2 * y_optimal = $30
15 + $2 * y_optimal = $30
$2 * y_optimal = $30 - $15
$2 * y_optimal = $15
y_optimal = $15 / $2
y_optimal = 7.5
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On January 1, 2021, Lyle's Limeade issues 5%,15-year bonds with a face amount of $76,000 for $68,552, priced to yleld 6\%, Interest is paid semiannually. What amount of interest expense will be recorded in the December 31, 2021, annual income statement? (Do not round your intermediate calculations. Round your final answer to nearest whole dollar amount.)
The interest expense recorded on the December 31, 2021, annual income statement for Lyle's Limeade bonds will be approximately $497.
To calculate the interest expense for the Lyle's Limeade bonds, we need to consider the face value of the bonds, the interest rate, and the time period.
The face amount of the bonds is $76,000, and they were issued for $68,552. The difference between the face amount and the issued price is called the discount, which in this case is $7,448 ($76,000 - $68,552). The discount represents the interest expense over the life of the bonds.
The bonds have a 15-year term and pay interest semiannually. Therefore, there will be 30 interest periods (15 years * 2). To calculate the interest expense per period, we divide the discount by the number of periods: $7,448 / 30 = $248.27.
Since interest is paid semiannually, there will be two interest payments in a year. Therefore, the interest expense for the annual income statement will be double the interest expense per period: $248.27 * 2 = $496.54.
Rounded to the nearest whole dollar amount, the interest expense recorded on the December 31, 2021, annual income statement will be $497.
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Q1 - Selling price per unit $35
- VC per unit $11
- Fixed Cost $43,000
- Sales volume or units sold or sales in unit 19,000
1) Please calculate the Total Sales. Total VC, Total CM and Net Income
2) if removing the sales person monthly salary $7,700, and giving $7 per speaker sold commission.
the sales volume increase by 35%, please calculate the new income statement
3) What is the CM ratio (using the original info provided)?
4) What is the Break-even point in unit and in dollars(using the original info provided)?
Total Sale is a term used to describe all income made from the sale of goods or services during a particular time frame. It indicates the entire sum of money a company has received from clients in exchange for goods or services.
1. Original Income Statement:
Total Sales = Selling price per unit * Units sold
Total Sales = $35 * 19,000 = $665,000
Total Variable Costs (TVC) = VC per unit * Units sold
Total VC = $11 * 19,000 = $209,000
Contribution Margin (CM) = Total Sales - Total VC
CM = $665,000 - $209,000 = $456,000
Net Income = CM - Fixed Costs
Net Income = $456,000 - $43,000 = $413,000
2. New Income Statement after changes:
New Sales Volume = 19,000 * 1.35 = 25,650 units
Total Sales = Selling price per unit * New Sales Volume
Total Sales = $35 * 25,650 = $898,750
Total Variable Costs (TVC) = VC per unit * New Sales Volume
Total VC = $11 * 25,650 = $282,150
Contribution Margin (CM) = Total Sales - Total VC
CM = $898,750 - $282,150 = $616,600
Net Income = CM - Fixed Costs - Salesperson Salary + Commission
Net Income = $616,600 - $43,000 - $7,700 + ($7 * 25,650) = $512,200
3. CM ratio:
CM ratio = (CM / Total Sales) * 100
CM ratio = ($456,000 / $665,000) * 100 = 68.72%
4. Break-even point:
Break-even point in units = Fixed Costs / Contribution Margin per unit
Contribution Margin per unit = Selling price per unit - VC per unit
Contribution Margin per unit = $35 - $11 = $24
Break-even point in units = $43,000 / $24 = 1,791.67 units (rounded up to 1,792 units)
Break-even point in dollars = Break-even point in units * Selling price per unit
Break-even point in dollars = 1,792 * $35 = $62,720
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Suppose that the required reserve ratio is 11%, currency in circulation is $800 billion, the amount of checkable deposits is $920 billion, and excess reserves are $25 billion. a) Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. (4 marks) b) Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1,800 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) remain the same, predict the effect on the money supply. (2 marks) c) At the start of the COVID 19 crisis, the Federal Reserve began injecting the banking system with massive amounts of liquidity. Explain what would happen to the economy and money multiplier if large amounts of reserves are held as excess reserves. (2 marks)
The money supply can be calculated using the currency deposit ratio and the excess reserve ratio. The currency deposit ratio is the ratio of currency in circulation to checkable deposits, which is 0.87 in this case.
The excess reserve ratio is the ratio of excess reserves to checkable deposits, which is 0.027 in this case. The money multiplier is the reciprocal of the reserve requirement ratio, which is 9.09 in this case.
b) If the central bank conducts an unusually large open market purchase, it increases the reserves of banks. Given the ratios calculated in part (a), the money supply would increase by a multiple of the initial increase in reserves. However, the specific effect on the money supply would depend on how banks choose to utilize the increased reserves.
c) When large amounts of reserves are held as excess reserves, the money multiplier decreases, limiting the expansion of the money supply. This can reduce the effectiveness of monetary policy in stimulating economic activity. Additionally, if excess reserves are not being utilized for lending and investment, it can result in a decrease in economic activity as banks are not providing as much credit to businesses and individuals.
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(Complex annuity) Upon graduating from college 35 years ago, Dr. Nick Riviera was already thinking of retirement. Since then, he has made deposits into his retirement fund on a weekly basis in the amount of $40. Nick has just completed his final payment and is at last ready to retire. His retirement fund has earned 8.8% interest compounded weekly. a. How much has Nick accumulated in his retirement account? b. In addition to all this, 20 years ago, Nick received an inheritance check for $20,000 from his beloved uncle. He decided to deposit the entire amount into his retirement fund. What is his current balance in the fund? a. Since graduating from college 35 years ago, Dr. Nick Riviera has made deposits into his retirement fund on a weekly basis in the amount of $40. If his retirement fund has earned 8.8% interest compounded weekly, how much has Nick accumulated in his retirement account? (Round to the nearest cent.)
a. Nick has accumulated approximately $489,405.07 in his retirement account.
b. Nick's current balance in the fund is approximately $509,405.07.
a. To calculate how much Nick has accumulated in his retirement account, we can use the formula for the future value of an ordinary annuity with weekly compounding:
[tex]FV = P * [(1 + r/52)^{(n*52)} - 1] / (r/52)[/tex]
Where:
FV is the future value
P is the periodic payment (weekly deposit of $40)
r is the interest rate per period (8.8%)
n is the number of periods (35 years)
Plugging in the given values, we have:
[tex]FV = 40 * [(1 + 0.088/52)^{(35*52)} - 1] / (0.088/52)\\= 40 * [21.70184 - 1] / (0.001692)\\= 40 * (20.70184/ 0.001692)\\= 40 * 12235.1267\\= $489,405.07[/tex]
Therefore, Nick has accumulated approximately $489,405.07 in his retirement account.
b. To calculate Nick's current balance in the fund after receiving the inheritance check, we simply need to add the inheritance amount of $20,000 to the previously calculated accumulated amount:
Current balance = Accumulated amount + Inheritance amount
= $489,405.07 + $20,000
= $509,405.07
Therefore, Nick's current balance in the fund is approximately $509,405.07.
Learn more about future value here:
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