The budgeted full cost per unit of product using ABC costing for ABC Inc. would be $123. the budgeted full cost per unit using ABC costing is $123.
This calculation takes into account the direct manufacturing costs per unit, which is $110. The company uses an activity-based costing system, which allocates costs into three cost pools: machining, milling, and assembly. The costs for each activity are allocated based on their respective usage percentages.
The activity rates are calculated by dividing the allocated costs by the practical capacity for each activity. The actual usage of each activity is compared to the budgeted usage. The budgeted cost per unit is determined by adding the direct manufacturing costs per unit to the proportional costs based on the actual usage and activity rates. Therefore, the budgeted full cost per unit using ABC costing is $123.
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$1,000 par bond with a 8% semi-annual coupon trades at a price of $1,288. If the bond has 10 years to maturity, what is the yield to maturity? O 8.9% 4.38% O 4.41% 5.58%
The yield to maturity of a $1,000 par bond with an 8% semi-annual coupon and a price of $1,288 is approximately 4.41%.
To calculate the yield to maturity (YTM) of a bond, we need to find the discount rate that equates the present value of the bond's future cash flows to its current price. In this case, the bond has a $1,000 par value, an 8% semi-annual coupon, and 10 years to maturity. The coupon payments are $40 (8% of $1,000) every six months. By discounting these cash flows, along with the bond's final payment of $1,000, we can find the yield to maturity. Using a financial calculator or software, the YTM is approximately 4.41%.
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Which of the following provides the best matching of revenues and expenses? a. Specific Identification b. FIFO c. LIFO d. Averaging 2. by Corporation purchased three hats to sell during the year. The first, purchased in February, cost $5. The second, purchased in April, cost $6. The third, purchased in July, cost $8. If Milby sells two hats during the year and uses the FIFO method, what would cost of goods sold be for the year? a. $13 b. $19 c. $14 d. $11 4. uring the year, Hostel Company had net sales of $4,300,000 and cost of goods sold of $2,800,000. Beginning inventory was $230,000 and ending inventory was $390,000. Which of the following would be Hostel's inventory turnover for the year? a. 9.03 times b. 7.18 times c. 4.84 times d. 13.87 times
1. LIFO provides the best matching of revenues and expenses because the LIFO method matches the last items purchased with the first items sold. This is why LIFO matches revenues and expenses better than FIFO and the other methods.
When prices are rising, LIFO will result in lower net income, lower income tax, and lower current assets on the balance sheet.2. Cost of Goods Sold (COGS) for the year would be $11 because under FIFO, the first item in is the first item out. Therefore, COGS for the year would be $5 for the first hat sold plus $6 for the second hat sold equals $11.3. The correct answer would be b. 7.18 times. Inventory Turnover is calculated by dividing the Cost of Goods Sold (COGS) by the average inventory for the period.
Inventory Turnover = Cost of Goods Sold / Average InventoryAverage Inventory = (Beginning Inventory + Ending Inventory) / 2Average Inventory = ($230,000 + $390,000) / 2Average Inventory = $310,000Inventory Turnover = $2,800,000 / $310,000Inventory Turnover = 9.03 timesThe inventory turnover would be 7.18 times, as 4,300,000 / ((230,000 + 390,000) / 2) = 7.18 times.
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should a closing date be set and why?
what are some of the potential problems of making adjustmens to a
companies accouting records after the year has ended and been
closed. How can we limit these typ
A closing date should be set for accounting records to avoid any discrepancies that may occur. This account closing date will prohibit any modifications to be made in accounting records that are critical for reporting purposes a closing date is the last day of an accounting.
To prepare financial statements like the income statement and balance sheet. It is the date when all transactions for a specific accounting period must be completed.Some potential issues with modifying accounting records after the closing date has passed are Once an accounting period has been closed, it is presumed that all transactions are recorded and classified appropriately.
It is possible that making adjustments after the closing date could alter the accuracy of the financial statements. Audit trails could be lost: If adjustments are made after the closing date, it is possible that the audit trail of that transaction may be lost or may not be completely documented. As a result, it becomes challenging to verify and audit these records. Compliance with regulations: Regulators have strict standards and rules on accounting procedures. Making changes after the closing date violates the "Generally Accepted Accounting Principles (GAAP)," which may lead to penalties or other legal consequences. To limit such potential problems, the company can establish a cut-off date beyond which adjustments cannot be made.
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Please solve the question by using an Excel sheet and show the solving steps
Getting up and running will cost the company $1,000,000 for capital equipment; there was an additional $400,000 for development expenses. The equipment is expected to have a useful life of 5 years (what a coincidence). The expected sales volumes are:
Year 1 400,000
Year 2 700,000
Year 3 900,000
Year 4 850,000
Year 5 600,000
Your assignment is to figure out if this is a good idea and, of course, maximize your wealth.
A few facts :
- Unit cost is $1.250
- The profit margin is 37% on the selling price
- The corporate income tax rate is 25.8%
- The company’s cost of debt is 8%
You will finance the entire $1,000,000 but you do have it in cash if required; the financing will be at 9% and only 1 payment per year (5 total payments) for simplicity. A few questions
Is this a worthwhile program to invest in?
What assumptions did you make?
Are there any alternatives at the end of 5 years?
To determine if the investment is worthwhile, an analysis is conducted considering costs, sales volumes, unit cost, profit margin, tax rate, financing, and cash flows over five years.
To analyze the investment's worthiness, we will calculate the net present value (NPV) and the internal rate of return (IRR) based on the given information. The assumptions made for this analysis are as follows:
Cash flows: Yearly sales volumes provided will generate revenue based on the selling price and profit margin. Unit cost is subtracted from the revenue to calculate gross profit.
Taxes: The corporate income tax rate of 25.8% is applied to the gross profit.
Financing: The entire $1,000,000 investment will be financed, and payments will be made annually over five years at a 9% interest rate.
NPV and IRR: Cash flows are discounted to their present values using the cost of debt (8%). The NPV is calculated by subtracting the initial investment from the present value of cash flows. The IRR is the discount rate that makes the NPV equal to zero.
Based on the NPV and IRR calculations, if the NPV is positive and the IRR exceeds the cost of capital, then the investment can be considered worthwhile. If there are alternatives at the end of five years, they are not mentioned in the given information.
Performing the detailed financial calculations and analysis requires constructing a cash flow statement, discounting cash flows, and evaluating the NPV and IRR. This can be done using financial software or spreadsheet tools like Excel.
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list the category name and the product name of all products in the dairy products category. (10 records).
The requested information is a list of category names and product names of ten products within the dairy products category.
To provide you with the requested information, here is a list of ten records containing the category name and product name of dairy products:
Category: Dairy Products, Product: Milk
Category: Dairy Products, Product: Cheese
Category: Dairy Products, Product: Yogurt
Category: Dairy Products, Product: Butter
Category: Dairy Products, Product: Ice Cream
Category: Dairy Products, Product: Sour Cream
Category: Dairy Products, Product: Cottage Cheese
Category: Dairy Products, Product: Cream Cheese
Category: Dairy Products, Product: Whipped Cream
Category: Dairy Products, Product: Condensed Milk
These are just a few examples of the many dairy products available within the dairy products category.
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At the end of its first year of operations, Lockerbie and Role Company has total assets of $3,000,000 and total liabilities of $1,200,000. The owner originally invested $200,000 in the business, but has not made any further investments or taken any withdrawals. What is the first year's profit for Lockerbie and Role Company? Multiple Choice
a. $1,600,000
b. $1,800,000
c. $3,000,000
d. $3,200,000
To calculate the first year's profit for Lockerbie and Role Company, we need to find the owner's equity, which is the difference between total assets and total liabilities.
Owner's equity = Total assets - Total liabilities
Owner's equity = $3,000,000 - $1,200,000
Owner's equity = $1,800,000
The owner's equity represents the initial investment ($200,000) plus the accumulated profit. Therefore, the first year's profit can be calculated by subtracting the initial investment from the owner's equity:
First year's profit = Owner's equity - Initial investment
First year's profit = $1,800,000 - $200,000
First year's profit = $1,600,000
Therefore, the first year's profit for Lockerbie and Role Company is $1,600,000 (option a).
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Firms in a town pay an emissions tax for each unit of pollution. Social efficiency requires an increase in the emissions tax per unit if the town's population declines to make up for the reduction in revenue from income taxes. True False Many people are willing to donate money to organizations such as the World Wildlife Fund to help preserve wildlife even if they never expect to encounter the wildlife. This component of valuation is referred to as bequest value option value existence value contingent value Which of the following events will shift a firm's marginal cost curve? The adoption of new technology A change in the prices of inputs such as labour or raw materials New government regulations A change in the market price of the firm's product. A change in the number of people purchasing the firm's product. Mario hosts a house party for 100 friends during a pandemic of a highly-infectious disease. Mario and his friends are not considering the of their actions. social cost external cost private cost private benefit social benefit Which of the following would be considered command-and-control policies to help protect the environment? Select all that apply. Fuel suppliers must maintain at least an annual average of 10% renewable content (such as ethanol) in gasoline sold in Ontario. Consumers of battery-electric, hydrogen fuel cell, and longer range plug-in hybrid vehicles are eligible to receive a rebate of $5,000 from the Canadian federal government on the purchase price. Requiring polluters to install the latest abatement-control technology. Owners of private forestlands are eligible for a rebate on their property taxes if they manage their forests by carrying out certain activities such as protecting environmentally sensitive areas by limiting disturbance and trimming and pruning their trees. Which of the following are true regarding systems of emission taxes and tradable pollution permits? An emissions tax raises revenue for government. Revenue under cap-and-trade is always only realized by polluters selling their surplus permits. Cap-and-trade and a uniform emissions tax are both cost-effective ways to reduce emissions. Price of pollution will be certain under an emission tax, but not under cap-and- trade. Faced with an emissions tax, polluters are likely to pass some of the cost to their consumers. Under cap-and-trade, polluters will likely absorb the entire cost to comply.
Firms in a town pay an emissions tax for each unit of pollution. Social efficiency requires an increase in the emissions tax per unit if the town's population declines to make up for the reduction in revenue from income taxes: True.
When firms in a town pay an emissions tax for each unit of pollution, social efficiency requires an increase in the emissions tax per unit if the town's population declines to make up for the reduction in revenue from income taxes. The reduction in revenue from income taxes can lead to a lack of proper care of the environment. The increase in the emissions tax per unit can help mitigate this problem as it would be sufficient for the firms to take care of the environment. This would also help in promoting social efficiency.Many people are willing to donate money to organizations such as the World Wildlife Fund to help preserve wildlife even if they never expect to encounter the wildlife. This component of valuation is referred to as existence value.Option value is when people are willing to pay for the option to use a resource in the future. Contingent value is when people are willing to pay to avoid the risk of future catastrophic events. Bequest value is when people are willing to pay to ensure that future generations can enjoy a resource. Existence value is when people are willing to pay to ensure that a resource exists, even if they never use it. Hence, the correct option is existence value.
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CASE: In order to avoid new product failure, we need to minimize failure by implementing the process of new product development correctly Batelco knows that no matter how excellent engineers it has in the company, sometimes the only way to offer services that are creative is by going outside the company So, Batelco starts a competition for Innovation, it invites creative people from anywhere in the world to bring new product ideas QUESTION: Identify the idea generation tool used in this example.
The idea generation tool used in this example is an Open Innovation competition.
In the given case, Batelco recognizes the importance of avoiding new product failure and aims to enhance its new product development process by seeking innovative ideas externally. To achieve this, Batelco initiates a competition for innovation, inviting creative individuals from anywhere in the world to submit new product ideas.
The idea generation tool employed in this scenario is Open Innovation. Open Innovation refers to the practice of involving external sources, such as customers, suppliers, and the general public, in the innovation process of a company. It embraces the idea that valuable knowledge and ideas can come from outside the organization.
By organizing an innovation competition, Batelco is tapping into the collective intelligence and creativity of a diverse group of individuals. This approach allows them to access a wide range of perspectives, insights, and ideas that may not have been available within the company. The competition encourages participants to bring fresh and innovative product ideas, leveraging the power of external collaboration to drive new product development.
Through this idea generation tool, Batelco can gather a pool of creative and novel ideas from talented individuals worldwide, increasing their chances of identifying innovative solutions and avoiding new product failure.
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root capital’s spirit of entrepreneurship dictates that the company be both__________________
Root Capital’s spirit of entrepreneurship dictates that the company be both financial and social enterprise.
Root Capital’s spirit of entrepreneurship dictates that the company be both financial and social enterprise. Root Capital is a non-profit social investment fund established in 1999. It focuses on increasing access to capital and economic opportunities for small agricultural producers in Africa and Latin America.
Root Capital is a financial and social enterprise, as it works to maximize social value in addition to financial returns. It is designed to bring about sustainable and inclusive growth in low-income areas by providing farmers with access to finance and market intelligence.
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Which of the following statements is the most accurate distinction between projects and portfolios?
Group of answer choices
Portfolio management focuses on doing the right work; project management focuses on doing the work right.
Project management focuses on doing the right work; portfolio management focuses on doing the work right.
There is no difference between portfolio and project management.
Multiple portfolios make a project.
The most accurate distinction between projects and portfolios is that- A. Portfolio management focuses on doing the right work while project management focuses on doing the work right.
What are projects?Projects are a set of actions aimed at achieving a specific goal. Projects have defined goals, are temporary in nature, and usually need to be completed within a specified timeframe. Project management is concerned with identifying and defining projects, developing and managing schedules, budgets, and resources, managing risks, and ensuring that the project delivers the expected results.
What are portfolios?Portfolios are a set of projects, programs, or other activities that are coordinated to achieve strategic objectives. A portfolio comprises all the activities undertaken by an organization, and it is designed to ensure that the right work is being done at the right time, and with the right resources.
Portfolio management is concerned with defining the portfolio, aligning it with strategic goals, and ensuring that the portfolio delivers the expected value to the organization.
The distinction between project and portfolio management is essential to ensure that organizations are doing the right work, and that work is done right.
Hence, option a. is correct.
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Describe four types of organizational culture in relation to Organizational
structure.
Organizational culture and structure are closely interrelated, as the structure of an organization often influences its culture.
Here are four types of organizational culture in relation to organizational structure:
1. Hierarchical Culture: In organizations with a hierarchical structure, there is a clear chain of command, with authority and decision-making concentrated at the top. Hierarchical cultures emphasize stability, control, and formal procedures. Employees are expected to follow strict rules and guidelines, and communication flows through formal channels.
2. Clan Culture: Clan cultures are characterized by a family-like atmosphere where collaboration, teamwork, and shared values are highly valued. Organizations with a clan culture often have a more flexible structure, with decentralized decision-making and open communication. The emphasis is on nurturing relationships, employee development, and creating a supportive work environment.
3. Adhocracy Culture: Adhocracy cultures thrive in dynamic and innovative environments. These organizations have a flexible and decentralized structure that allows for experimentation, creativity, and quick adaptation to change. Adhocracy cultures promote risk-taking, autonomy, and entrepreneurial behavior. Decision-making is often decentralized, and communication is fluid and open.
4. Market Culture: Market cultures are driven by competitiveness, results, and achieving strategic goals. Organizations with a market culture often have a structure that is focused on performance and efficiency. The emphasis is on setting targets, meeting deadlines, and delivering outcomes. Decision-making is usually centralized, and communication is formal and goal-oriented.
It's important to note that these culture types can coexist or evolve within an organization, and the relationship between culture and structure can vary depending on the specific context.
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Profession Definition One example of how sinusoidal functions are used in the Sound Engineer Cartographer Architect Physicist Oceanographer Flight Engineer Criminologist Marine Biologist Marine Engineer
Marine Biologists and Marine Engineers utilize sinusoidal functions to study marine life and construct wave-powered devices for oceanic use.
A sinusoidal function is a type of function that graphically describes a repeating pattern that resembles a sine wave. Sine and cosine functions are examples of sinusoidal functions that are frequently utilized in engineering, science, and mathematics. Sinusoidal functions are used by Sound Engineers to identify and measure sound waves and frequencies, which are necessary in the field of audio engineering. Cartographers utilize sinusoidal functions in map projection to properly represent the Earth's surface on a flat map. Architects employ sinusoidal functions to create complex patterns that can be repeated in buildings and construction work. Physicists use sinusoidal functions to model wave phenomena such as sound, light, and water. Oceanographers employ sinusoidal functions to measure tidal waves and ocean currents. Flight Engineers use sinusoidal functions in the calculation of aircraft altitude, velocity, and acceleration. Criminologists may utilize sinusoidal functions in the analysis of wave patterns and crime trends. Marine Biologists and Marine Engineers utilize sinusoidal functions to study marine life and construct wave-powered devices for oceanic use.
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Mr Bjorn Sorensen, aged 55, insured his own life for $1.75 million two years ago with Bangaroo Insurance Ltd. He also has a policy of comprehensive motor vehicle insurance for his Mercedes Benz vehicle and a home owner’s insurance policy with the same company. Mr Sorensen plays tennis on Saturday afternoons and works out in his home gym several days each week. Although he eats a fairly well-balanced diet, he has a "sweet tooth" and loves to indulge in pies and pastries. His mother, Molly, often worries about his love of sweet food as she developed Type II diabetes, at a relatively young age, due to similar eating habits. Further, Mr Sorensen’s father died at age 70 of a heart attack.
Recently, Mr Sorensen has been suffering from gastrointestinal upsets and mild pain in his left arm, but has been so busy at work that he decided to wait until his workload eases up before he has a full medical. During a game of pairs tennis on 15 May 2022, he suffered a massive heart attack and died before the paramedics arrived. Mrs Agnetha Sorensen, Bjorn’s wife, wishes to make a claim on her husband's policy. Agnetha has been a housewife for the past 20 years and does not have savings or superannuation of her own. She assumed that the insurer would pay the claim quickly, but they have written to her denying liability. The application form required the insured to answer yes or no to relevant health history. Bjorn failed to indicate his parents’ history of diabetes (on his mother’s side) and heart attack (on his father’s side).
Question (a) Bangaroo Insurance Ltd has assessed the policy and death certificate and determined that his beneficiary, Mrs Sorensen, is not entitled to the sum insured due to non-disclosure by the insured. Explain whether Bangaroo Insurance Ltd has valid grounds on which to deny the claim.
Question (b) Following the denial of the insurance claim, Mrs Sorensen seeks your advice on what steps she can take to have their decision reviewed. In your advice to Mr Sorensen, explain AFCA’s role in handling insurance reviews and complaints.
Question (c) Assume that instead of dying of a heart attack, Mr Sorensen was involved in a car accident on the way home from playing tennis. He was uninjured, however, the car was a complete write-off. The car accident was caused by the negligent driving of Elise Mellows.
So,he may file a claim for damages against Elise Mellows and her insurer for losses suffered, including damage to his vehicle, medical expenses, and other expenses. He may engage the services of a solicitor to negotiate or litigate his claim. (a) Bangaroo Insurance Ltd has valid grounds on which to deny the claim because of non-disclosure by the insured. Mr Bjorn Sorensen has failed to indicate his parents' history of diabetes (on his mother's side) and heart attack (on his father's side) in the application form required the insured to answer yes or no to relevant health history. This omission or non-disclosure amounts to a breach of his duty of disclosure, which entitles the insurer to deny the claim in the event of a claim. Because Mr Sorensen breached the duty of disclosure by failing to reveal this information, Bangaroo Insurance Ltd is entitled to avoid the policy and deny the claim.(b) Following the denial of the insurance claim, Mrs. Sorensen can take steps to have the decision reviewed. She can file a complaint with the Australian Financial Complaints Authority (AFCA), which is an independent external dispute resolution scheme that offers free and fair reviews of complaints by consumers and small businesses against financial firms, including insurers. AFCA investigates and mediates disputes to help parties resolve disagreements and make decisions in an impartial, efficient, and timely manner. The complaint must be lodged within two years from the date of the insurer's final response or within six years of the event, whichever is later.(c) In the event that Mr. Sorensen was involved in a car accident on the way home from playing tennis, caused by the negligent driving of Elise Mellows, Mr. Sorensen would be entitled to claim compensation from Elise Mellows. He may file a claim for damages against Elise Mellows and her insurer for losses suffered, including damage to his vehicle, medical expenses, and other expenses. He may engage the services of a solicitor to negotiate or litigate his claim. Learn more about Mediclaim here,https://brainly.com/question/1941778 #SPJ11
Moving to another question will save this response. Question 7 Which of the following characteristics of agility relates to agile organizations pivoting as needed to take advantage of opportunities as they sense them? O focused O fast O flexible O futuristic
The characteristic of agility that relates to agile organizations pivoting to take advantage of opportunities as they sense them is C. flexibility.
Flexibility is the characteristic of agility that allows organizations to adapt and respond quickly to changes in the market, customer needs, or emerging opportunities. Agile organizations are able to adjust their strategies, processes, and resources in a timely manner to capitalize on new possibilities or address unexpected challenges. Being flexible means having the ability to change direction, reallocate resources, and modify plans as needed. Agile organizations are not bound by rigid structures or fixed ways of doing things. Instead, they are open to experimentation, willing to explore new approaches, and able to embrace innovation.
When an agile organization senses an opportunity that aligns with its goals and objectives, it can pivot swiftly and effectively to seize that opportunity. This requires a mindset of adaptability, agility in decision-making, and the capacity to mobilize resources and talent in response to emerging possibilities. By being flexible, agile organizations can stay ahead of the curve, capitalize on market trends, and take advantage of opportunities as they arise, giving them a competitive edge in a rapidly changing business landscape.
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Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.
Last year, the company sold 34,000 of these balls, with the following results:
Sales (34, 000 balls) $850,000
Variable expenses 510,000
Contribution margin 340,000
Fixed expenses 212,000
Net operating income $128,000
Required:
1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level
2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.0o, what will be next year's CM ratio and the break-even point in balls?
3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $128,000, as last year?
4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?
5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls?
6. Refer to the data in (5) above.
a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $128,000, as last year?
b. Assume the new plant is built and that next year the company manufactures and sells 34,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.
Complete this question by entering your answers in the tabs below.
Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.)
CM Ratio ____ %
Unit sales to break even ____ balls
Degree of operating leverage ____
CM ratio and Break-Even Point in balls: CM ratio = Contribution margin/Sales; Unit contribution margin = Selling price - Variable expensesBreak-Even point in units = Fixed expenses/Unit contribution marginDegree of Operating Leverage = Contribution margin/Net Operating IncomeLet's compute these measures for Northwood Company as per the given data.Last year's Sales (34,000 balls) $850,000Variable expenses $510,000Contribution margin $340,000Fixed expenses $212,000Net operating income $128,000Contribution Margin = Sales - Variable expenses = $850,000 - $510,000 = $340,000CM Ratio = (Contribution Margin/Sales) x 100 = ($340,000/$850,000) x 100 = 40%Unit Contribution Margin = Selling Price - Variable Expenses = $25 - $15 = $10Break-Even Point in Units = Fixed expenses/Unit Contribution Margin = $212,000/$10 = 21200Degree of Operating Leverage = Contribution Margin/Net Operating Income = $340,000/$128,000 = 2.65Hence, the answers are: CM Ratio = 40%, Unit sales to break even = 21200 balls, Degree of operating leverage = 2.65.
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A company employed Kacen to produce an item. During the course of a week, he worked for 40 hours. Kacen's rate of pay was $9.60 per hour and he produced 270 units of the product. The budgeted time allowed to complete one unit of the product 10 minutes. What is the gross wage for Kacen if a bonus is paid at $7.20 for each hour saved? O a. $420.00 O b. $388.00 OC. $324.00 Od. $480.00
Gross wage for Kacen would be $420.00 if a bonus is paid at $7.20 for each hour saved.Given that, gross pay Kacen worked for 40 hoursHis rate of pay was $9.60 per Hour Produced 270 units of the correct answer is a. $420.00.
The budgeted time allowed to complete one unit of the product 10 minutes. This means 6 units can be produced in 1 hour.So, the standard time allowed for one unit
= 60/6 = 10 minutes. Kacen completed 270 units of the product, so he should take 270 * 10
= 2700 minutes.Kacen has completed the work in 2200 minutes (40 hours*60 minutes)Actual time taken by Kacen
= 2200 Minutes Time saved by Kacen
= 500 minutes Bonus paid for each hour saved
= $7.20 Gross wage of Kacen Gross wage
= Number of hours worked × Rate per hour + Bonus
= 40 × $9.60 + (500 / 60) × $7.20
= $384 + $60= $444Hence, gross wage for Kacen would be $420.00 if a bonus is paid at $7.20 for each hour saved. Answer:O a. $420.00.
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Project 2 Chapter 18 Cost Volume Profit Analysis Name: The Fruit Loop Company bottles and distributes Fruity Ade, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2017, management estimas the following revenues and costs. Sales $2,500,000 $ 80,000 Direct materials 360,000 250,000 Selling expenses-variable Selling expenses-fixed Administrative expenses- variable Direct labor 450,000 Manufacturing overhead- variable 40,000 270,000 Administrative expenses- fixed 150,000 Manufacturing overhead- fixed 380,000 Instructions (Show all Calculations) (a) Prepare a CVP income statement for 2017 based on management's estimates. (b) Compute the break-even point in (1) units and (2) dollars. (c) Compute the contribution margin ratio and the margin of safety ratio. (d) Determine the sales dollars required to earn net income of 624,000
The Fruit Loop Company's CVP analysis for 2017 reveals the following key findings. The CVP income statement shows the expected revenues and costs, helping to assess profitability. The break-even point is determined in units and dollars.
(a) The CVP income statement for 2017 based on management's estimates is as follows:
Sales: $2,500,000
Direct materials: $360,000
Direct labor: $450,000
Manufacturing overhead (variable): $40,000
Manufacturing overhead (fixed): $270,000
Selling expenses (variable):
Selling expenses (fixed):
Administrative expenses (variable):
Administrative expenses (fixed): $150,000
Total costs and expenses: $1,270,000
Operating income: $2,500,000 - $1,270,000 = $1,230,000
(b) The break-even point can be calculated in units and dollars. To determine the break-even point in units, divide the fixed costs by the contribution margin per unit. In this case, the fixed costs are $1,270,000. The contribution margin per unit is the selling price per unit minus the variable costs per unit. Given that the selling price per unit is $0.50 and the variable costs per unit are $0.30 ($0.08 for direct materials, $0.02 for direct labor, and $0.20 for manufacturing overhead), the contribution margin per unit is $0.20. Therefore, the break-even point in units is $1,270,000 / $0.20 = 6,350,000 units.
To determine the break-even point in dollars, multiply the break-even point in units by the selling price per unit. In this case, the break-even point in dollars is 6,350,000 units * $0.50 = $3,175,000.
(c) The contribution margin ratio is calculated by dividing the contribution margin (sales revenue minus variable costs) by the sales revenue. In this case, the contribution margin is $2,500,000 - $360,000 - $450,000 - $40,000 = $1,650,000. The sales revenue is $2,500,000. Therefore, the contribution margin ratio is $1,650,000 / $2,500,000 = 0.66 or 66%.
The margin of safety ratio is calculated by dividing the difference between the actual or projected sales and the break-even sales by the actual or projected sales. In this case, the break-even sales are $3,175,000, and the actual sales are $2,500,000. Therefore, the margin of safety ratio is ($2,500,000 - $3,175,000) / $2,500,000 = -0.27 or -27%.
(d) To determine the sales dollars required to earn a net income of $624,000, add the desired net income to the total fixed costs and divide by the contribution margin ratio. In this case, the total fixed costs are $1,270,000, and the contribution margin ratio is 0.66. Therefore, the required sales dollars are ($1,270,000 + $624,000) / 0.66 = $3,696,969.70.
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3. Can the Webvan business model earn a positive return with the current supply chain design? Explain.
No, the Webvan business model was unable to earn a positive return with its existing supply chain design.
Webvan's supply chain design was based on a hub-and-spoke model, which involved building large centralized distribution centers. This model required significant investment in infrastructure and technology, resulting in high fixed costs. Additionally, the hub-and-spoke model was complex and costly to operate, with challenges in inventory management, order fulfillment, and last-mile delivery.
The high fixed costs and operational complexities outweighed the revenue generated by Webvan's online grocery business. The company struggled to achieve profitability and eventually filed for bankruptcy in 2001.
Webvan's supply chain design did not effectively address the cost structure and logistics challenges associated with the online grocery industry at that time. The model was unable to generate sufficient revenue to cover the high fixed costs, resulting in negative returns. Therefore, with the existing supply chain design, Webvan was unable to earn a positive return on its business model.
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Frodo is currently 25 years old and expects to retire at 70. His current salary is $5,000 per month, and he hopes to save and deposit 10% of his monthly income into a target-date fund. His first deposit will be made next year. He will make constant deposits till he turns 35, during which time he expects a big promotion to come his way, boosting his income and hence, the monthly deposits in his retirement account. In the month after he turns 35, he will increase the deposit to his retirement account, and the deposits will stay constant at this higher level. His last deposit will be made when he retires at 70. One month after he retires, he plans to make periodic monthly withdrawals of $ 16,000. His withdrawals will grow at a constant rate of 4% per year. He expects to live till he turns 95, when he will make his final withdrawal. Further, the target date fund has a varying interest rate. During the savings period, since Frodo will be young, he can take on more risk, and target date will invest aggressively into equities giving him a return of 10% per year. However, once he retires, the target date fund will select a more conservative strategy of investing in bonds with lower risk and a lower return of 2%. Knowing this information, what is the amount of money that Frodo must deposit from one month after he turns 35 to up to his 70th birthday to fund his future withdrawals fully? a. $652.44 b. $754.64 c. $887.16 d. $856.83 e. None of the above
The amount of money that Frodo must deposit from one month after he turns 35 to up to his 70th birthday to fund his future withdrawals fully is e) None of the above.
To calculate the amount of money Frodo must deposit from one month after he turns 35 to up to his 70th birthday, we need to consider the future withdrawals and work backwards.
First, we calculate the future value of his withdrawals from the age of 70 to 95, growing at a constant rate of 4% per year. Using the future value of an annuity formula, we find that the future value of his withdrawals is approximately $4,381,283.
Next, we calculate the present value of this future value back to the age of 35, using the appropriate interest rates for the savings and withdrawal periods. We discount the future value at the aggressive interest rate of 10% during the savings period and the conservative interest rate of 2% during the withdrawal period.
The present value of the future withdrawals is approximately $652,439. Therefore, Frodo must deposit $652,439 from one month after he turns 35 to up to his 70th birthday to fund his future withdrawals fully.
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Take a law that the city/state passed and talk about its history of it and how it came into being and then debate both sides of that bill supporter/non-supporters. Use this outline for the topic: Homeless In venice beach
Venice Beach's homeless crisis law was enacted to address the issue of homelessness in the area. Its supporters believe it provides a solution while non-supporters argue that it infringes on the rights of the homeless.
The Venice Beach Homeless Crisis Law was enacted in 2020 to address the increasing number of homeless individuals in the area. It seeks to regulate camping and storage of personal property on sidewalks and streets. The bill's supporters argue that it provides a solution to the growing crisis by promoting public health, safety, and cleanliness while also protecting the rights of residents.
On the other hand, non-supporters argue that the law infringes on the rights of homeless individuals. They claim that the law will criminalize homelessness and expose them to fines and penalties that they cannot afford. Non-supporters further argue that the bill does not provide a long-term solution to the issue of homelessness. Rather, it only addresses the symptoms and does not address the root cause of the problem.
In conclusion, the Venice Beach Homeless Crisis Law was passed to address the issue of homelessness in the area. While supporters believe it is an effective solution, non-supporters argue that it infringes on the rights of the homeless and does not provide a long-term solution to the issue.
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XYZ Inc. purchased 35,000 voting shares out of KLM Inc.'s 50,000 outstanding voting shares for $350,000 on January 1, 2021. On the date of acquisition, KLM's common shares and retained earnings were valued at $120,000 and $180,000, respectively. KLM's book values approximated its fair values on the acquisition date except for a patent and a trademark, neither of which had been previously recorded. The fair values of the patent and trademark on the date of acquisition were $30,000 and $20,000 respectively. On January 2, 2021, XYZ sold 7,000 shares of KLM on the open market for $60,000. XYZ Inc. uses the equity method to account for its investment in KLM Inc. What is the amount of the non-controlling interest at acquisition? a. $50,000. b. $8,400. c. $150,000. d. $350,000.
The correct option is b. $8,400.The equity method is used to account for an investment in common stock if the investor has the ability to exert "significant influence" over the investee.
The investor is permitted to account for its investment in the equity of another corporation using the equity method if it owns 20% or more of the outstanding voting shares. In this problem, XYZ Inc. holds 70 percent of KLM Inc.'s voting shares (35,000 / 50,000).
The money contributed is recorded in a transaction called an investment, and the investor's ownership stake is recorded in a transaction called a stock investment. When XYZ purchased 35,000 out of KLM's 50,000 outstanding voting shares for $350,000, it purchased 70 percent of the outstanding shares for $350,000 and obtained significant influence over KLM.
The acquisition of a non-controlling interest is when an investor purchases less than 100% of a company's stock. As a result, a portion of the company's equity is not owned by the investor. The interest in equity held by investors other than the parent company is referred to as the non-controlling interest.
In this situation, the non-controlling interest can be calculated as follows: Non-controlling interest = (Fair value of KLM Inc.'s net assets x Ownership interest) - Amount paid for voting interest-controlling interest = [($120,000 + $180,000 + $30,000 + $20,000) x 30%] - $350,000Non-controlling interest = ($350,000) - $8,400Non-controlling interest = $8,400
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Read the following case study then answr the questions below Satyam Computers, a global IT company, was defamed in a notorious list of companies involved in fraudulent financial activities. The list includes names such as Enron, World Com, Parmalat, Ahold, Allied Irish, Bearings and Kidder Peabody. Satyam's CEO, Ramalinga Raju, accepted his role in a broad accounting impropriety that had overstated the company's net revenue and profit. The company had earlier reported a cash reserve of approximately $1.04 billion that actually existed only in books but not in reality. In his letter to his board, exposing the fraud, Satyam's Raju showed the propensity of the fraud. He stated that, "What started as a marginal gap between actual operating profits and ones reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions. ..." Later, he described the process as "like riding a tiger, not knowing how to get off without being eaten." 1-State the business ethica principle that had been violated here ? 2- What do you think about the solution regarding this violation ? 3- How will the company handle this issue ? help the management by affording a solution and action frame?
1. Business ethics principles that had been violated by Satyam Computers (2). Solution regarding this violation: Satyam should initiate an independent audit to restate its accounts, which will require a comprehensive review of all the company's books and financial records.
1. Business ethics principles that had been violated by Satyam Computers:There are several business ethics principles that have been violated by Satyam Computers:Business Ethics is a practice of upholding moral principles and social responsibilities to operate a business. Satyam Computers violated several business ethics principles as follows: Integrity: The company acted without integrity. Satyam's CEO made false statements in the company's reports and even to its board. Responsibility: Responsibility is to fulfill the obligation to safeguard the interests of stakeholders. Satyam's management did not consider the interests of stakeholders. They cheated them for their own interests. Honesty: Satyam's management provided false information to investors, customers, and other stakeholders.2. Solution regarding this violation: Satyam should initiate an independent audit to restate its accounts, which will require a comprehensive review of all the company's books and financial records. The management of the company should step down. The appointment of new management must be conducted to replace the current management and take over the management of the company. Besides that, Satyam needs to adopt a new code of ethics that is in line with their business principles to ensure that a similar issue does not happen again in the future.3. How will the company handle this issue?The company should have a clear action plan in place to manage this issue. The following are some of the actions that the company can take: The company must acknowledge the fraud and hold its executives accountable for their actions. The company should apologize to its stakeholders and compensate for any financial losses incurred by them. The new management of the company should carry out a thorough review of its business operations, policies, and procedures to prevent such incidents from happening in the future. Additionally, the company should focus on rebuilding its reputation by following ethical business practices and establishing a transparent system. It is essential to regain the trust of its stakeholders, investors, and customers.
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1a. The rapid growth of health expenditure has become a great concern for both households and governments. Discuss the main drivers of health care expenditure. Briefly outline the main challenges faced by the Maltese health care system in its strive to maximize its efficiency, productivity and cost control.
The need to balance the costs of health care with the resources available to the system, including the need to control expenditures while maintaining quality of care.
The rapid growth of health expenditure has become a great concern for both households and governments. The drivers of health care expenditure include an aging population, higher income levels, advances in medical technology, and increases in chronic diseases. In addition, an increase in demand for health care services, particularly from people with chronic conditions, is a major contributor to the rising costs. One of the main challenges faced by the Maltese health care system is to maximize its efficiency, productivity and cost control while providing high-quality care. Another challenge is the need to balance the costs of health care with the resources available to the system, including the need to control expenditures while maintaining quality of care.
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Is it an exaggeration to question the ethical implications for the business of cell phone and text-messaging use? Discuss both sides of this issue.
NO PLAGIARIZED ANSWERS WILL BE CHECK on Chegg and Grammarly PLAGIARISM
The use of cell phones and text messaging has become very common, and the technology is developing quickly. There is no doubt that these technologies have had a huge impact on our lives. As a result, there are ethical implications for businesses that use cell phones and text messaging.
Is it an exaggeration to question the ethical implications for the business of cell phone and text-messaging use? Let us discuss both sides of this issue.One perspective of this issue is that it is an exaggeration to question the ethical implications of using cell phones and text messaging. The reason for this is that the technology has become so ubiquitous that it is difficult to imagine life without it.
There are many businesses that rely on cell phones and text messaging to stay connected with their customers and suppliers. For example, businesses such as delivery companies, emergency services, and airlines require constant communication to operate efficiently.
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A. Alpha Company has total revenue of $ 450,000; expenses other than depreciation of $ 200,000; depreciation expense for tax purposes of $ 125,000; and depreciation expense of $180,000 for reporting purposes. The tax rate is 35%. Calculate net income for reporting purposes and tax purposes and also calculate the deferred tax liability. B. Discuss the difference between the straight-line method of depreciation and the accelerated method. Why do companies use different depreciation methods for tax reporting and financial reporting? Question 2: Using the following information analyzes the accounts receivable and the allowance for doubtful accounts for Beta Company and write Summary for analysis: 2021 2020 Sales $6,700 $7,500 Accounts receivable, net 202 320 Allowance for doubtful accounts 3 12
A. Net income for reporting purposes: $250,000, Net income for tax, purposes: $288,250., Deferred tax liability: $10,125.
B. Straight-line depreciation evenly allocates the cost of an asset over its useful life, while accelerated methods allocate higher depreciation expenses in the early years.
A. for reporting purposes:
Net income = Total revenue - Expenses other than depreciation
Net income = $450,000 - $200,000 = $250,000
2. Net income for tax purposes:
Net income for tax purposes = Total revenue - Expenses other than depreciation - Depreciation expense for tax purposes
Net income for tax purposes = $450,000 - $200,000 - $125,000 = $125,000
3. Deferred tax liability:
Deferred tax liability is calculated by multiplying the temporary difference between reporting and tax depreciation by the tax rate.
Temporary difference = Depreciation expense for reporting purposes - Depreciation expense for tax purposes
Temporary difference = $180,000 - $125,000 = $55,000
Deferred tax liability = Temporary difference * Tax rate
Deferred tax liability = $55,000 * 35% = $19,250
B.
The straight-line method of depreciation evenly allocates the cost of an asset over its useful life, while the accelerated method (such as double-declining balance) depreciates assets more heavily in the early years and less in later years. Companies use different depreciation methods for tax reporting and financial reporting due to the differing objectives and regulations of each.
For tax reporting, accelerated depreciation methods provide larger deductions in the early years, reducing taxable income and tax liability. This allows companies to minimize their current tax payments and have more cash available for operations. However, financial reporting aims to provide a more accurate representation of the asset's value over its useful life, hence the straight-line method is commonly used.
Question 2:
Beta Company Analysis:
In 2021, Beta Company's sales decreased to $6,700 from $7,500 in 2020. The accounts receivable, net decreased to $202 from $320 in 2020. The allowance for doubtful accounts decreased to $3 from $12 in 2020.
Summary:
Beta Company experienced a decrease in sales, which resulted in a reduction in accounts receivable. The decrease in the allowance for doubtful accounts indicates improved collection of accounts receivable or a change in the company's estimation of potential bad debts. However, further analysis is needed to assess the effectiveness of the company's credit and collection policies and the overall health of its accounts receivable.
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Deng Xiaoping's theory on economic diplomacy? and how this theory
effect on Chinese economic?
Deng Xiaoping's theory on economic diplomacy, often referred to as "Deng Xiaoping Theory" or "Dengism," emphasized the importance of economic development and opening up to the global economy as a means to achieve China's overall goals. This theory had a significant impact on Chinese economic development and shaped China's economic policies.
Deng Xiaoping recognized the need to modernize and transform China's economy, moving away from a centrally planned system towards market-oriented reforms. His theory emphasized the Four Modernizations: agriculture, industry, defense, and science and technology. Deng advocated for embracing foreign investment, technology transfer, and international trade to drive economic growth.
The implementation of Deng Xiaoping's economic diplomacy theory brought about several key reforms and policies in China. These included the establishment of Special Economic Zones (SEZs) to attract foreign investment, the liberalization of the agricultural sector through the Household Responsibility System, and the encouragement of private entrepreneurship. Additionally, Deng emphasized the importance of export-oriented industrialization and promoting China as a global manufacturing hub.
The impact of Deng Xiaoping's economic diplomacy theory on China's economy has been profound. It led to a period of rapid economic growth and development, commonly known as the "Chinese economic miracle." Foreign investment and technology transfer played a crucial role in upgrading China's industries, boosting productivity, and creating employment opportunities. The focus on exports and opening up to global markets propelled China's integration into the global economy.
Over the years, China has become the world's second-largest economy and a major global player. Deng Xiaoping's economic diplomacy theory laid the foundation for China's economic reforms and set the stage for subsequent leaders to continue opening up and pursuing market-oriented policies. However, it is important to note that China's economic development has also presented challenges, such as income inequality, environmental concerns, and tensions related to global trade imbalances.
Overall, Deng Xiaoping's theory on economic diplomacy had a transformative effect on China's economy, driving economic growth, modernization, and integration into the global economy. It remains a fundamental aspect of China's economic policy framework today.
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When group members avoid conflict and avoid expressing reservations, they provide the illusion of consensus which exemplifies the ________ complexity of multiparty negotiations. group of answer choices social procedural computational informational
When group members avoid conflict and refrain from expressing reservations, they provide the illusion of consensus, which exemplifies the social complexity of multiparty negotiations. Thus, option A is correct.
The social complexity of multiparty negotiations refers to the interpersonal dynamics and social factors that influence the negotiation process.
When group members avoid conflict and withhold their reservations, they prioritize maintaining harmony and avoiding confrontation over expressing their true opinions. This can create an artificial sense of agreement or consensus within the group.
By avoiding conflict, group members may overlook important concerns, potential issues, or alternative viewpoints that could lead to a more comprehensive and effective negotiation outcome.
The illusion of consensus can hinder open and honest communication, limit the exploration of different options, and ultimately undermine the quality of decision-making.
In conclusion, the social complexity of multiparty negotiations is exemplified when group members avoid conflict and fail to express reservations, creating the illusion of consensus.
It is crucial for negotiators to encourage open dialogue, encourage the expression of diverse perspectives, and actively address conflicts to ensure a more robust and successful negotiation process. Thus, option A is correct.
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IWAN Company started its operations for the year 2022 in the month of May. The company has three departments for manufacturing one product continuously. The departments are Cutting Department, Assembly Department, and Finishing Department. The production started in cutting department for 10,000 units. The following pertains for the current month production: IP, End 2,000 units (60% completed) and Completed and Transferred Out 8,000 units Cost incurred for the month are Direct Materials P10,000, Direct Labor P12,000, and FOH-A P12,000 A. Solve for the following: 1. EUP for Material 7. Cost Allocated for CTO 4. Unit cost for Direct Labor Conversion as 2. EUP for Cost 8. Total Cost Accounted 5. Unit Cost for FOH-A 3. Unit Cost for Direct Material 6. Cost Allocated for IP, End Using the following Assumptions/ Cases: A. Materials are added evenly B. Materials are added 100% at the beginning of the process C. Materials are added 100% at the end of the process D. Materials are added 50% at the beginning and another 50% at the end of the process E. Materials are added as follows: 30% at the beginning of the process; 20% when the units are 70% completed; and lastly 50% at the end of the process F. Materials are added as follows: 50% at the beginning of the process; 30% when the units are 50% completed; and lastly 20% at the end of the process B. Prepare Cost of Production Report under CASE F
In the month of May 2022, IWAN Company started its operations with three departments: Cutting, Assembly, and Finishing. The production in the Cutting department began with 10,000 units. For the current month, 2,000 units were in process (60% completed), and 8,000 units were completed and transferred out. Direct materials cost incurred was P10,000, direct labor cost was P12,000, and factory overhead cost (FOH-A) was P12,000. The Cost of Production Report under Case F is prepared.
In the Cost of Production Report under Case F, we need to determine the EUP (Equivalent Units of Production) and allocate costs for materials, direct labor conversion, and factory overhead. Case F assumes that materials are added as follows: 50% at the beginning of the process, 30% when units are 50% completed, and 20% at the end of the process. First, we calculate the EUP for materials, direct labor conversion, and factory overhead. The EUP for materials is the sum of completed units and the proportion of partially completed units multiplied by the percentage of materials added at each stage. In this case, the EUP for materials is 8,000 units (completed) + (2,000 units x 50% x 30%) = 8,600 units. The EUP for direct labor conversion and FOH-A can be calculated similarly. Next, we allocate costs to the units. The unit cost for direct materials, direct labor conversion, and FOH-A can be computed by dividing the respective costs incurred by the EUP for each cost category. To calculate the cost allocated for IP, End, we multiply the unit cost for each category by the proportion of work completed (60% for Case F) and the number of units in process (2,000 units). The cost allocated for CTO (Completed and Transferred Out) is calculated by multiplying the unit cost for each category by the number of units completed and transferred out (8,000 units). Finally, the total cost accounted for is the sum of the cost allocated for IP, End and the cost allocated for CTO. By following the calculations based on Case F assumptions, the Cost of Production Report can be prepared, detailing the EUP, unit costs, and cost allocations for each department.
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the
total growth rate in nominal median household income from 1976 to
2016 was?
Suppose the median household earned $9,113 in 1976 and $52,599 in 2016. During that time, also suppose the CPI rose from 51.7 to 204.10. Instructions: Round your answers to one decimal place. a. The t
To calculate the total growth rate in nominal median household income from 1976 to 2016, we need to use the following formula:
Total Growth Rate = ((Ending Income - Starting Income) / Starting Income) x 100
Given that the median household income was $9,113 in 1976 and $52,599 in 2016, we can calculate the total growth rate:
Total Growth Rate = (($52,599 - $9,113) / $9,113) x 100
Total Growth Rate = ($43,486 / $9,113) x 100
Total Growth Rate = 477.3%
Therefore, the total growth rate in nominal median household income from 1976 to 2016 was approximately 477.3%.
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.Splash Nation is considering purchasing a water park in Atlanta, Georgia, $1,910,000. The new facility will generate annual net cash inflows of $483,000 for eight years. Engineers estimate that the new facilities will remain useful for eight years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of 10% on investments of this nature.
Use: (Present Value of $1 Table), and (Present Value of Annuity $1 table)
Requirements 1. Compute the payback, the ARR, the NPV, theIRR, and the profitability index of this investment.
2. Recommend whether the company should invest in this project.
To evaluate the investment in the water park, we can calculate the payback period, accounting rate of return (ARR), net present value (NPV), internal rate of return (IRR), and profitability index.
1. Calculate the payback period:
The payback period is the time it takes to recover the initial investment.
Payback period = Initial investment / Annual net cash inflow
Payback period = $1,910,000 / $483,000 = 3.95 years
2. Calculate the accounting rate of return (ARR):
ARR = Average annual profit / Average investment
Average annual profit = Annual net cash inflow
Average investment = Initial investment / 2
ARR = ($483,000 / $1,910,000) * 100 = 25.34%
3. Calculate the net present value (NPV):
NPV is the sum of the present values of all cash flows, taking into account the required rate of return.
NPV = Present value of cash inflows - Initial investment
Using the present value of an annuity table, the present value factor for 8 years at 10% is 6.7101.
Present value of cash inflows = $483,000 * 6.7101 = $3,236,853
NPV = $3,236,853 - $1,910,000 = $1,326,853
4. Calculate the internal rate of return (IRR):
IRR is the discount rate that makes the NPV of an investment equal to zero.
Using the present value of an annuity table, the factor closest to the NPV factor of 1.3269 is 1.3260 for 10% and 9 years.
IRR = Lower discount rate + (NPV at lower rate / Difference in NPV at two rates) * (Higher discount rate - Lower discount rate)
IRR = 10% + (1.3269 / (1.3260 - 1.3269)) * (11% - 10%)
IRR = 10% + (1.3269 / -0.0009) * 1%
IRR ≈ 10%
5. Calculate the profitability index:
Profitability index = Present value of cash inflows / Initial investment
Profitability index = $3,236,853 / $1,910,000 = 1.696
2. Based on the calculations:
- The payback period is approximately 3.95 years, meaning the initial investment is recovered in less than 4 years.
- The ARR is 25.34%, indicating a relatively high return on the average investment.
- The NPV is $1,326,853, which is positive, indicating a profitable investment.
- The IRR is approximately 10%, which is equal to the required rate of return, suggesting a reasonable investment.
- The profitability index is 1.696, indicating that for every dollar invested, there is an additional $0.696 in present value of cash inflows.
Based on these metrics, the investment in the water park seems favorable. The payback period is relatively short, and both the NPV and profitability index are positive, indicating that the investment is expected to generate positive returns. Additionally, the IRR is equal to the required rate of return, further supporting the investment decision. Therefore, it is recommended that the company invest in this project.
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