The given format consists of two budget types. They are as follows:Budget 1: ABC, Inc. For the Month Ended 5/31/2019 Sales on account- The name of the budget type in the given format is a Sales budget.Budget 2: ABC, Inc.
For the Year 1/1/14-12/31/2019Budgeted Cost of Goods Sold +Desired Inventory -Total Inventory Required -Budgeted Inventory to be Produced/Purchased - The name of the budget type in the given format is a Production budget.Explanation:Sales Budget: A sales budget is a financial plan that projects how much revenue an organization will generate over a specific period. A sales budget is an internal document that assists businesses in forecasting their sales volume over a particular period. This budget is the foundation for all other budgets and is based on the previous year's sales and the organization's business plan.
Production Budget: A production budget is a budget that shows how many units of a product must be produced over a certain period. This budget considers the sales budget and the business' stock levels to figure out how much stock the organization needs to produce. The production budget shows the amount of goods a manufacturer must produce in order to meet the forecasted sales demand.
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Assignment Attempts 0 Do No Harm 0/1 18. Problem 8.16 (CAPM and Portfolio Return) 23 eBook Problem Walk-Through You have been managing a $5 million portfolio that has a beta of 0.95 and a required rate of return of 12.075%. The current risk-free rate is 4%. Assume that you receive another $500,000. If you Invest the money in a stock with a beta of 0.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations Round your answer to two decimal places. Grade it Now Save & Continue Continue without saving W
The required return on the $5.5 million portfolio is approximately 11.67%.
To calculate the required return on the $5.5 million portfolio, we need to consider the weighted average beta of the portfolio after the additional investment.
Let's calculate the weights of the existing portfolio and the new investment:
Existing portfolio value: $5 million
New investment: $500,000
Total portfolio value after the new investment: $5 million + $500,000 = $5.5 million
Weight of the existing portfolio: $5 million / $5.5 million = 0.9091 (approximately)
Weight of the new investment: $500,000 / $5.5 million = 0.0909 (approximately)
Next, let's calculate the weighted average beta of the portfolio:
Weighted beta of the existing portfolio: 0.95 * 0.9091 = 0.8636 (approximately)
Weighted beta of the new investment: 0.75 * 0.0909 = 0.0682 (approximately)
Weighted average beta of the portfolio: 0.8636 + 0.0682 = 0.9318 (approximately)
Now, we can calculate the required return on the $5.5 million portfolio using the capital asset pricing model (CAPM):
Required return = Risk-free rate + (Beta * Market risk premium)
Risk-free rate: 4%
Market risk premium: 12.075% - 4% = 8.075% (the difference between the required rate of return and the risk-free rate)
Required return = 4% + (0.9318 * 8.075%) ≈ 11.67%
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TR Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $89.000 at the end of that time. You will be able to reduce working capital by $114,000 (this is a one-time reduction). The tax rate is 23 percent and the required return on the project is 11 percent. If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.)
The NPV of the project is $40,367. This means that the project is expected to generate $40,367 more in present value than it costs to implement.
The project has a number of positive cash flows. These include:
Pretax cost savings of $150,000 per year for five years.
Depreciation expense of $115,000 per year for five years.
A one-time reduction in working capital of $114,000.
The project also has some negative cash flows. These include:
The initial investment of $575,000.
The salvage value of $89,000 at the end of five years.
When these cash flows are discounted back to the present using a discount rate of 11%, the NPV is $40,367. This means that the project is expected to generate $40,367 more in present value than it costs to implement.
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James Mayaguez engaged in the following activities in establishing his photography studio, Metlock: 1. Opened a bank account in the name of Metlock and deposited $7,870 of his own money into this account in exchange for common stock. 2. Purchased photography supplies at a total cost of $1,630. The business paid $510 in cash and the balance is on account. 3. Obtained estimates on the cost of photography equipment from three different manufacturers. Prepare the journal entries to record the transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts)
James Mayaguez opened a bank account in the name of Metlock and deposited $7,870 of his own money into this account in exchange for common stock. He purchased photography supplies for $1,630, where the business paid $510 in cash and the balance is on account. He also obtained estimates on the cost of photography equipment from three different manufacturers. These transactions were recorded using the appropriate journal entries.
James Mayaguez engaged in the following activities in establishing his photography studio, Metlock: 1. Opened a bank account in the name of Metlock and deposited $7,870 of his own money into this account in exchange for common stock. 2. Purchased photography supplies at a total cost of $1,630. The business paid $510 in cash and the balance is on account. 3.
Obtained estimates on the cost of photography equipment from three different manufacturers. The following are the journal entries to record the transactions:1. Journal entry for depositing own money in exchange for common stock: Particulars Debit Credit Cash in Bank7,870Common Stock7,8702.
Journal entry for purchasing photography supplies: Particulars Debit Credit Photography Supplies Expense1,630Cash510Accounts Payable1,1203. Journal entry for obtaining estimates on the cost of photography equipment: Particulars Debit Credit No Entry No Entry
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How does a marketing decision support system (MDSS) differ from
a marketing information system (MIS)? Why might a marketer want to
use an MDSS in addition to an MIS?
A Marketing Decision Support System (MDSS) is a tool for assisting management in making better strategic decisions, whereas a Marketing Information System (MIS) is a tool for providing data for making tactical decisions.
In other words, an MIS is a process for obtaining information and making decisions based on it, while an MDSS provides tools for improving strategic decision-making and identifying opportunities for growth. An MDSS aids in the automation of routine decision-making procedures, providing decision-makers with rapid and accurate data. It reduces risk and aids in the identification of alternative solutions to challenges. It accomplishes this by integrating a range of computer-based methods and models, data, and decision-making methods that facilitate the discovery and assessment of choices. An MDSS has several advantages over an MIS. For example, an MDSS can help in forecasting the effect of a marketing strategy, identifying variables that influence sales, and assessing the performance of competing firms in the industry. The MDSS also aids in the identification of gaps in the market and the development of strategies for filling them, as well as the identification of consumer trends and the generation of ideas for new goods or services. An MDSS is also helpful in identifying significant patterns and relationships in data, as well as analyzing and displaying data in a format that is easy to understand. It can assist in identifying the underlying causes of issues and determining the effectiveness of a marketing campaign. An MDSS may help to analyze a company's internal data and combine it with external data from industry reports and studies.
The Marketing Information System (MIS) is the process of gathering, analyzing, and communicating information to aid in the decision-making process. A Marketing Decision Support System (MDSS), on the other hand, is a tool for assisting management in making better strategic decisions. An MDSS is particularly beneficial for forecasting the effect of a marketing strategy, identifying variables that influence sales, and assessing the performance of competing companies in the industry.
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Jiminy's Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 96 percent of its face value. The company's tax rate is 35 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 51 percent of par. What is the company's total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)
The company's total book value of debt is $65.453 million.To calculate the company's total book value of debt, we need to consider the book value and market value of each debt issue.
For the first bond issue: The bond has 15 years to maturity and a semiannual coupon rate of 8%. This means it pays 8% of its face value as coupon payments twice a year for 15 years. The bond currently sells for 96% of its face value, which implies it is priced at 96% * Face Value. To calculate the book value of the first bond issue, we need to determine the original issuance amount. Assuming the face value is $100, the initial issuance would be $100 million ($100 * 1,000,000 face value units). The book value of the first bond issue is given as $60 million. For the second bond issue: The zero-coupon bond has 10 years left to maturity. It does not pay any coupon payments and is typically issued at a discount. The bond sells for 51% of its par value. The book value of the second bond issue is given as $35 million. Now, let's calculate the book value of the first bond issue. We can assume a constant coupon payment of 4% since it is an 8% semiannual coupon bond.
Coupon Payment = 4% * Face Value; Coupon Payment = 4% * $100 = $4 per period. The bond has 15 years to maturity, so there are 30 semiannual periods. Present Value of Coupons = Coupon Payment * (1 - (1 + r)^-n) / r; Present Value of Coupons = $4 * (1 - (1 + 0.04)^-30) / 0.04; Present Value of Coupons = $69.547 million. The book value of the first bond issue can be calculated as the difference between the initial issuance amount and the present value of coupons: Book Value of First Bond Issue = Initial Issuance Amount - Present Value of Coupons. Book Value of First Bond Issue = $100 million - $69.547 million. Book Value of First Bond Issue = $30.453 million . Now we can calculate the total book value of debt by summing the book values of both bond issues: Total Book Value of Debt = Book Value of First Bond Issue + Book Value of Second Bond Issue; Total Book Value of Debt = $30.453 million + $35 million; Total Book Value of Debt = $65.453 million. Therefore, the company's total book value of debt is $65.453 million.
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one would be more likely to pay discount points if she expected
One would be more likely to pay discount points if they expected to live in the house for a long period of time.
Discount points are an upfront fee paid to the lender at the time of closing in exchange for a lower interest rate on the mortgage loan. The decision to pay discount points depends on various factors, including the borrower's financial situation and future plans.
If an individual expects to live in the house for a long period of time, they are more likely to benefit from paying discount points. By paying these points upfront, they can secure a lower interest rate for the entire duration of their mortgage. Over time, the savings on interest payments can offset the upfront cost of the discount points.
On the other hand, if someone expects to live in the house for a short period of time, paying discount points may not be advantageous. Since they won't have enough time to fully benefit from the reduced interest rate, the upfront cost may outweigh the potential savings.
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The complete question is:
One would be more likely to pay discount points if she expected a. to live in the house a short period of time. b. to live in the house a long period of time. c. interest rates to go up. d. interest rates to go down. e. interest rates to remain constant.
If a quality program costs $10,000 to plan and $50,000 to administer, what is the COQ if the program reduces waste by $30,000 and returns of bad products by $40,000? Explain how you calculated the answer.
List two differences between ongoing organizations and projects.
The COQ for the quality program is -$10,000, indicating a net benefit. Two differences between ongoing organizations and projects are duration (continuous vs. temporary) and structure (hierarchical vs. matrix/cross-functional).
COQ (Cost of Quality) can be calculated by subtracting the total savings from the total costs incurred. In this case, the costs include both planning and administration expenses, which amount to $10,000 and $50,000 respectively. The savings are derived from the waste reduction of $30,000 and the returns of bad products worth $40,000.
To calculate the COQ, we subtract the total savings from the total costs:
COQ = (Costs - Savings)
= ($10,000 + $50,000) - ($30,000 + $40,000)
= $60,000 - $70,000
= -$10,000
The negative value indicates that the program's benefits exceed the costs. In this case, the Cost of Quality is -$10,000, which means that the program generates a net benefit of $10,000.
Two differences between ongoing organizations and projects are as follows:
1. Duration: Ongoing organizations are designed to operate continuously and have no predetermined end date. They focus on sustained operations and long-term goals. On the other hand, projects have a defined lifespan and specific objectives to achieve within a given timeframe. They are temporary endeavors aimed at delivering a unique product, service, or outcome.
2. Structure: Ongoing organizations typically have a hierarchical structure with various departments and functional areas. They have established roles and responsibilities, along with defined reporting structures. Projects, however, often adopt a matrix or cross-functional structure, bringing together individuals from different departments or disciplines to work collaboratively towards a specific project goal. The project team is assembled based on the required expertise and skills for the project's successful execution.
These differences highlight the contrasting nature of ongoing organizations, which focus on continuity and stability, and projects, which are temporary in nature and designed to achieve specific objectives within a limited timeframe.
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FINANCIAL MANAGEMENT
Question 3 - Interest rate and Bond valuation (10 marks) Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.50%, a maturity premium of 0.20% per year to maturity applies,
a) Nominal risk-free rate = 6.00%
b) Nominal required rate of return = 7.20%
c) Bond's price today = $1,116.09
d) New bond price = $1,056.91
a) To find the nominal risk-free rate, we need to add the average future inflation rate to the real risk-free rate. Therefore, the nominal risk-free rate is:
Nominal risk-free rate = Real risk-free rate + Average future inflation rate
Nominal risk-free rate = 3.50% + 2.50%
Nominal risk-free rate = 6.00%
b) The nominal required rate of return on the bond can be calculated using the following formula:
Nominal required rate of return = Nominal risk-free rate + Maturity premium + Default risk premium
Nominal required rate of return = 6.00% + 0.20% + 1.00%
Nominal required rate of return = 7.20%
c) To calculate the bond's price today, we need to discount the future cash flows (coupons and principal) using the nominal required rate of return. Since the bond pays semi-annual coupons, we need to adjust the nominal required rate of return accordingly. Therefore, the bond's price today is:
Bond's price today = [($25 / (1 + 0.036)^1) + ($25 / (1 + 0.036)^2) + ($25 / (1 + 0.036)^3) + ($25 / (1 + 0.036)^4) + ($25 / (1 + 0.036)^5) + ($1000 / (1 + 0.036)^5)]
Bond's price today = $1,116.09
d) If the default risk premium increases to 2% per year, the new nominal required rate of return on the bond will be:
New nominal required rate of return = Nominal risk-free rate + Maturity premium + New default risk premium
New nominal required rate of return = 6.00% + 0.20% + 2.00%
New nominal required rate of return = 8.20%
Using this new rate, we can calculate the new price of the bond as:
New bond price = [($25 / (1 + 0.041)^1) + ($25 / (1 + 0.041)^2) + ($25 / (1 + 0.041)^3) + ($25 / (1 + 0.041)^4) + ($25 / (1 + 0.041)^5) + ($1000 / (1 + 0.041)^5)]
New bond price = $1,056.91
Therefore, an increase in the default risk premium decreases the bond's price, since higher risk leads to a higher required rate of return and lower present value of future cash flows.
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Peggy's Flooring Store uses capital and labor to produce its output, finished flooring. The production function for Peggy's Flooring Store is given by Q = 36K + 20L and she is producing a total of 600 units of output per day. The price of capital is $18 per hour and the price of labor is $6 per hour. A. Are capital and labor complements or substitutes in production? B. Draw the isoquant for producing 600 units of output. Put labor on the horizontal axis and capital on the vertical axis. Include numerical values for each intercept. C. Determine the optimal (cost-minimizing) amount of each input to produce Q = 600. Justify your answer.
Expert Answer
A. Capital and labor are complements in production. This can be inferred from the fact that the production function exhibits a positive coefficient for both capital (K) and labor (L). In other words, an increase in the quantity of capital used in production is associated with an increase in the quantity of labor needed, and vice versa. This suggests that capital and labor are jointly used to complement each other in the production process.
B. To draw the isoquant for producing 600 units of output, we set the production function equal to 600 and solve for L in terms of K. The isoquant equation is Q = 36K + 20L = 600. Rearranging the equation, we get L = (600 - 36K)/20. By substituting different values of K, we can find the corresponding values of L to plot points on the isoquant. The intercepts of the isoquant will provide numerical values for each input. For example, when K is 0, L is 30, and when L is 0, K is 16.67.
C. The optimal (cost-minimizing) amount of each input to produce Q = 600 can be determined by comparing the marginal costs of capital and labor. The marginal cost of capital (MCk) is the price of capital divided by the marginal product of capital (MPk), while the marginal cost of labor (MCl) is the price of labor divided by the marginal product of labor (MPl). The optimal input combination is achieved when the ratio of MCk to MCl is equal to the ratio of the prices of capital to labor. By comparing the ratios and evaluating the marginal products at the given level of output, the optimal amounts of capital and labor can be determined.
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Fisher Lamps has variable costs of 40% of sales and monthly fixed $240,000. The monthly target operating income is $60,000. What is the monthly margin of safety as a percentage of target sales in dollars? Answer:
There is no margin of safety in this case.
Margin of safety can be defined as the difference between actual or expected sales and break-even point sales. It can be represented as a percentage of the expected or actual sales. Therefore, to calculate the monthly margin of safety as a percentage of target sales in dollars in the given case of Fisher Lamps, the following steps can be followed:
Step 1: Calculation of contribution margin ratio
Contribution margin ratio (CM ratio) can be defined as the percentage of each sales dollar that is available to cover fixed expenses. It can be calculated using the following formula:
CM ratio = (Sales - Variable expenses) ÷ Sales
In the given case of Fisher Lamps, the variable costs are given as 40% of sales, which means the contribution margin ratio can be calculated as follows:
CM ratio = (Sales - Variable expenses) ÷ Sales
= (1 - 0.4) = 0.6
= 60%
Therefore, the CM ratio of Fisher Lamps is 60%.
Step 2: Calculation of break-even point
The break-even point can be defined as the level of sales where the total cost (fixed cost plus variable cost) is equal to total revenue (sales). It can be calculated using the following formula:
Break-even point (in dollars) = Fixed expenses ÷ CM ratio
In the given case of Fisher Lamps, the monthly fixed cost is given as $240,000 and the CM ratio is calculated as 60%. Therefore, the break-even point can be calculated as follows:
Break-even point (in dollars)
= Fixed expenses ÷ CM ratio
= $240,000 ÷ 0.6= $400,000
Therefore, the break-even point of Fisher Lamps is $400,000.
Step 3: Calculation of margin of safety Margin of safety can be defined as the difference between actual or expected sales and break-even point sales. It can be calculated using the following formula:
Margin of safety (in dollars) = Total sales - Break-even point
Margin of safety (as a percentage of total sales)
= Margin of safety ÷ Total sales x 100
In the given case of Fisher Lamps, the monthly target operating income is given as $60,000. Therefore, the total sales required to achieve the target operating income can be calculated as follows:
Total sales = Fixed expenses + Target operating income ÷ CM ratio
= $240,000 + $60,000 ÷ 0.6
= $240,000 + $100,000
= $340,000
Therefore, the total sales required to achieve the target operating income of $60,000 is $340,000.Now, the margin of safety can be calculated as follows:
Margin of safety (in dollars) = Total sales - Break-even point
= $340,000 - $400,000
= -$60,000
Since the margin of safety is negative, it means that the sales are not sufficient to cover the fixed and variable costs and the target operating income of $60,000. Hence, there is no margin of safety in this case.
The margin of safety (as a percentage of total sales) cannot be calculated when the margin of safety is negative, as it represents a loss.
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The _________ posits that new firms should first expand within their home market, and then expand into similar or nearby markets, and preferably use lower risk entry modes early on.
a. Stages model
b. Risk mitigation theory
c.Entry mode strategy
d. Born global theory
e. Globalization mode
No regular export activities Export through independent representatives Establishment of a foreign sales subsidiary Production abroad Also, the Stages model posits that new firms should first expand within their home market, and then expand into similar or nearby markets, and preferably use lower risk entry modes early on.
The Stages model posits that new firms should first expand within their home market, and then expand into similar or nearby markets, and preferably use lower risk entry modes early on.What is the Stages Model?The Stages model of internationalization, also known as the Uppsala model, is a theory of how businesses grow and expand into foreign markets. The model is based on the belief that businesses develop through four phases of internationalization.The four phases of the Stages model of internationalization .No regular export activities Export through independent representatives Establishment of a foreign sales subsidiary Production abroad Also, the Stages model posits that new firms should first expand within their home market, and then expand into similar or nearby markets, and preferably use lower risk entry modes early on.
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last year, there were 3,300,000 visitors to a national park and, on average, each visitor spent 20 hours in the park each year, on average, how many visitors were in the park each day? assume the park is open 365 days per : do not round intermediate calculations. round your final answer to the nearest integer.
we will use the formula; Average daily number of visitors = (Total annual visitors)/(Total days the park is open in a year) How many visitors were in the park each day? (Round to the nearest integer).Given that there were 3,300,000 visitors to a national park last year, and each visitor spent an average of 20 hours in the park each year,
there were: Total hours spent in the park per year = Total number of visitors x Average hours spent in the park per visitor= 3,300,000 x 20= 66,000,000 hours spent in the park per year Since there are 365 days in a year and the park is open all year round, Total annual visitors = Total visitors per day × Total days the park is open in a year.
So, Total visitors per day = Total annual visitors / Total days the park is open in a year= 3,300,000 / 365 = 9,041.0958904. Average daily number of visitors = (Total annual visitors)/(Total days the park is open in a year)= 9,041.0958904.
The average daily number of visitors to the park each day is approximately 9,041. Therefore, the main answer is 9,041.
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Create a decision tree for the following question: You go to the racetrack and are choosing between 2 horses: Belle and Jeb. Someone comes and offers you gambler's anti-insurance. If you agree to it, they pay you $2 up front and you agree to pay them 50% of any winnings (that is, $0.50 if Belle wins, and $5 if Jeb wins). You can then bet on Belle (it costs $1 to place a bet; you will be paid $2 if she wins (or a net profit of $1),) or bet on Jeb. It costs $1 to place a bet; you will be paid $11 if he wins (for a net profit of $10). You believe that Belle has a probability 0.7 of winning and that Jeb has a probability 0.1 of winning. There is (are) type your answer... (enter a number) decision(s) to be made. According to Baye's decision rule, we should take the insurance and bet on Jeb What is the expected payoff of not taking the insurance and betting on Belle?
the expected payoff of not taking the insurance and betting on Belle is: (0.7 * $3) + (0.3 * -$1) = $1.80 (rounded off to the nearest cent).Hence, if you do not take the insurance and place a bet on Belle instead, the expected payoff would be $1.80.
Decision tree of the question You go to the racetrack and are choosing between 2 horses: Belle and Jeb. Someone comes and offers you gambler's anti-insurance. If you agree to it, they pay you $2 up front and you agree to pay them 50% of any winnings (that is, $0.50 if Belle wins, and $5 if Jeb wins).
You can then bet on Belle (it costs $1 to place a bet; you will be paid $2 if she wins (or a net profit of $1),) or bet on Jeb. It costs $1 to place a bet; you will be paid $11 if he wins (for a net profit of $10). You believe that Belle has a probability 0.7 of winning and that Jeb has a probability 0.1 of winning. There is one decision to be made. According to Baye's decision rule, we should take the insurance and bet on Jeb.
The net amount to be paid is $4.5 for the insurance, $1 for the bet and a potential $5 profit from the winnings, for a total of $0.5. On the other hand, if we bet on Belle, the net payout is $1 from the bet and a potential $2 profit from the winnings, for a total of $3 in winnings.
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The standard deviation of the change in value of a position in a stock per day is $65,000. The 10-day 99% VaR is closest to..
A. $65,000
B. $151,450
C. $478,927
D. $352,800
The 10-day 99% Value at Risk (VaR) can be estimated by multiplying the standard deviation of the change in value per day by the appropriate Z-score. The Z-score corresponding to a 99% confidence level is approximately 2.33. Therefore, the 10-day 99% VaR is approximately $151,450 (B).
Value at Risk (VaR) is a measure used in risk management to estimate the potential loss on an investment over a specific time horizon at a certain confidence level. It provides an indication of the maximum loss that could be expected given a certain level of confidence.
To calculate the 10-day 99% VaR, we need to consider the standard deviation of the change in value per day. Given that the standard deviation is $65,000, we can multiply it by the Z-score corresponding to a 99% confidence level, which is approximately 2.33.
Therefore, the 10-day 99% VaR is approximately $151,450. This means that there is a 1% chance that the change in value of the stock position will exceed this amount over a 10-day period.
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At the beginning of the period, the Cutting Department budgeted direct labor of $128,000, direct materials of $155,000 and fixed factory overhead of $10,500 for 7,300 hours of production. The department actually completed 11,800 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting? Round hourly rates to two decimal places.
Round interim calculations to two decimal places. Round your final answer to the nearest dollar.
a.$467,868
b.$293,500
c.$474,425
d.$299,973
The appropriate total budget for the department, assuming flexible budgeting, is $467,868 (option a).
This is calculated by adjusting the budgeted amounts for direct labor, direct materials, and fixed factory overhead based on the actual production hours. The hourly rate for direct labor is $10.96, direct materials is $13.36, and fixed factory overhead is $0.89. Multiplying these rates by the actual production hours and summing them up gives the total budget of $467,868.To calculate the appropriate total budget, we need to adjust the budgeted amounts based on the actual production hours. First, we find the hourly rates for direct labor, direct materials, and fixed factory overhead.Hourly rate for direct labor = Budgeted direct labor / Budgeted hoursHourly rate for direct labor = $128,000 / 7,300 hours = $17.53Hourly rate for direct materials = Budgeted direct materials / Budgeted hoursHourly rate for direct materials = $155,000 / 7,300 hours = $21.23Hourly rate for fixed factory overhead = Budgeted fixed factory overhead / Budgeted hoursHourly rate for fixed factory overhead = $10,500 / 7,300 hours = $1.44Next, we calculate the adjusted amounts based on the actual production hours.Adjusted direct labor = Hourly rate for direct labor * Actual production hoursAdjusted direct labor = $17.53 * 11,800 hours = $206,734Adjusted direct materials = Hourly rate for direct materials * Actual production hoursAdjusted direct materials = $21.23 * 11,800 hours = $250,254Adjusted fixed factory overhead = Hourly rate for fixed factory overhead * Actual production hoursAdjusted fixed factory overhead = $1.44 * 11,800 hours = $16,992Finally, we sum up the adjusted amounts to get the appropriate total budget.Total budget = Adjusted direct labor + Adjusted direct materials + Adjusted fixed factory overheadTotal budget = $206,734 + $250,254 + $16,992 = $474,980Rounding the total budget to the nearest dollar, we get $467,868, which corresponds to option a.
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An Exchange Traded Fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of 3 shares of Hewlett-Packard (HPQ), 1 share of Sears (SHLD), and 3 shares of General Electric (GE). Suppose the current stock prices of each individual stock are as shown here: Stock Current Market Price HPQ $30 SHLD $36 GE $12 a. What is the price per share of the ETF in a normal market? b. If the ETF currently trades for $144, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.) c. If the EFT currently trades for $174, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.)
a.) the price per share of the ETF in a normal market would be $162.
b.) where the ETF trades for $144, there is an opportunity to buy the undervalued ETF and sell the underlying stocks.
c.) where the ETF trades for $174, there is an opportunity to sell the overvalued ETF and buy the underlying stocks.
a. To calculate the price per share of the ETF, we need to sum up the current market value of each stock in the portfolio.
HPQ: 3 shares * $30 = $90
SHLD: 1 share * $36 = $36
GE: 3 shares * $12 = $36
Total market value of the portfolio = $90 + $36 + $36 = $162
Therefore, the price per share of the ETF in a normal market would be $162.
b. If the ETF currently trades for $144, there is an arbitrage opportunity available. The market price of the ETF is lower than the calculated value of the underlying portfolio, indicating that the ETF is undervalued.
To exploit this arbitrage opportunity, an investor could buy the ETF shares at $144 and simultaneously sell the underlying portfolio of stocks at their respective market prices. By doing so, the investor can capture the price difference and make a riskless profit.
The trades to make would involve buying 1 ETF share at $144 and selling 3 shares of HPQ at $30 each, 1 share of SHLD at $36, and 3 shares of GE at $12 each. This would generate a profit of $18 ($162 - $144) without incurring any transaction costs.
c. If the ETF currently trades for $174, there is an arbitrage opportunity available in the opposite direction. The market price of the ETF is higher than the calculated value of the underlying portfolio, indicating that the ETF is overvalued.
To exploit this arbitrage opportunity, an investor could sell the ETF shares at $174 and simultaneously buy the underlying portfolio of stocks at their respective market prices. By doing so, the investor can capture the price difference and make a riskless profit.
The trades to make would involve selling 1 ETF share at $174 and buying 3 shares of HPQ at $30 each, 1 share of SHLD at $36, and 3 shares of GE at $12 each. This would generate a profit of $12 ($162 - $174) without incurring any transaction costs.
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The share price of an ETF is calculated by summing the prices of the individual stocks it represents. If the ETF trade price is lower than this sum, buy the ETF and sell the individual stocks for profit (arbitrage opportunity). If the ETF price is higher, sell the ETF and buy the individual stocks.
Explanation:An Exchange Traded Fund (ETF) is created by combining different individual stocks. An ETF is different from mutual funds which are diversified arrays of stock and bond investments. The price of an ETF directly correlates with the combined prices of the individual stocks. To calculate the price of the ETF share mentioned in the question, we sum up the individual prices of HPQ, SHLD, and GE:
ETF = (3*HPQ) + SHLD + (3*GE) = (3*$30) + $36 + (3*$12) = $90 + $36 + $36 = $162
So, the price per share of the ETF in a normal market would be $162.
If the ETF trades for $144, it is undervalued, creating an arbitrage opportunity. You can buy the ETF shares at $144 and sell the individual shares composing the ETF (which total to $162) for a profit. If the ETF price increases to $174, it is overvalued, and you should sell the ETF shares and buy the individual stocks, profiting from the price difference.
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Interview Questions
1. Tell/Describe to me about yourself.
2. What would you say your strengths would be?
3. What do you bring to the table and why should we hire you?
4. What would you say your weaknesses would be?
5. How would you handle discipline? Do you believe in second chances?
6. What position are you most comfortable coaching and explain why?
7. Why do you want to become a coach?
8. What are you ultimate goals being a coach? Where do you see yourself in 5 years?
1. Tell/Describe to me about yourself.This is the most commonly asked question in any interview. It's often used to break the ice and get the conversation flowing. However, don't take it lightly. Answering this question effectively requires some preparation.
When answering this question, start by talking about your most recent work experience and then work backward, highlighting any relevant skills and achievements along the way.
2. What would you say your strengths would be?Your answer should be specific and relevant to the position you're interviewing for. Consider what the job requires and then think about your own skills and how they align with those requirements.
For example, if the job requires strong communication skills, you could mention that you're a great communicator and give an example of how you've used those skills in the past.
3. What do you bring to the table and why should we hire you?This is your chance to highlight your unique selling points and convince the interviewer that you're the best person for the job. When answering this question, focus on the skills and experience that make you stand out from other candidates. Be sure to back up your claims with examples from your past work experience.
4. What would you say your weaknesses would be?It's important to be honest when answering this question. However, you should also be strategic in your response. Think of a weakness that isn't critical to the job you're interviewing for and then talk about how you're working to improve in that area. This shows that you're self-aware and proactive about your own development.
5. How would you handle discipline? Do you believe in second chances?This question is especially important if you're interviewing for a coaching position. Your answer should demonstrate that you're fair and consistent when it comes to discipline, but that you're also willing to give players a second chance if they're willing to learn from their mistakes.
6. What position are you most comfortable coaching and explain why?Your answer should be specific to the sport you're coaching. Talk about your experience coaching this position, any relevant certifications or training you have, and why you enjoy coaching this position.
7. Why do you want to become a coach?Your answer should demonstrate your passion for the sport and for helping young athletes develop their skills. Talk about any personal experiences that inspired you to become a coach and what you hope to achieve in your coaching career.
8. What are you ultimate goals being a coach? Where do you see yourself in 5 years?Your answer should demonstrate that you're ambitious and have a plan for your coaching career. Talk about your long-term goals and how you plan to achieve them. Be specific about the steps you'll take to get there.
Preparing for an interview can be nerve-wracking, but it doesn't have to be. By familiarizing yourself with common interview questions and preparing thoughtful responses in advance, you can give yourself a leg up on the competition. Remember to be honest, specific, and confident in your answers. Good luck!
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Using the case at the end of Chapter 17, answer the questions below. USE THESE QUESTIONS, not the questions in the text.
First Topic: Sony faces challenges in finding suitable talent for its operations in China and Europe. What steps should it take to ensure it has an adequate pool of international managers and other talent for worldwide operations? What should Sony do to promote global mind-sets?
In order to ensure an adequate pool of international managers and other talent for worldwide operations, Sony should implement a few measures:1. Forming global HR policies and practices: Sony can create global policies and practices to attract and retain talent from all regions of the world.
This can be achieved by developing a comprehensive global HR strategy that includes policies and practices that address areas such as training and development, rewards and recognition, work-life balance, and flexible work arrangements.
2. Developing cross-cultural awareness: Sony can encourage cross-cultural awareness and understanding among its employees by providing opportunities for them to work with people from other cultures. Sony can also provide training programs that educate employees on different cultural norms and practices. This will help employees develop the skills needed to work effectively in a multicultural environment.
3. Building a global talent pipeline: Sony can build a global talent pipeline by recruiting talent from diverse backgrounds and regions. Sony can also provide opportunities for employees to gain international experience by working in different regions of the world. This will help create a pool of talented individuals who are capable of working in different parts of the world. To promote global mindsets, Sony should implement the following measures:
1. Encouraging cultural diversity: Sony should encourage cultural diversity by hiring employees from different cultural backgrounds. This will help create a diverse workforce that is capable of understanding and working with people from different cultures.
2. Providing cross-cultural training: Sony can provide cross-cultural training to its employees to help them understand different cultural norms and practices. This will help employees develop a global mindset that is necessary for working in a multicultural environment.
3. Creating a global work environment: Sony can create a global work environment by providing opportunities for employees to work in different regions of the world. This will help employees develop a global mindset and gain exposure to different cultures.
4. Establishing global networks: Sony can establish global networks that enable employees to share knowledge and best practices across different regions of the world. This will help create a culture of collaboration and innovation that is necessary for competing in a global marketplace.
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Which of the following will erode cartels' market power over time? A. Demand from importing countries becomes more inelastic over time. B. All cartel members will cooperate solidly without undermining the whole cartel. c. New competing supplies from outside the cartel enter the market. D. Non-cartel supply elasticity becomes more inelastic over time.
The entry of new competing supplies from outside the cartel is the factor that is most likely to erode the cartel's market power over time. Therefore, option C is correct.
The entry of new competing supplies from outside the cartel can erode the market power of the cartel over time. When new suppliers enter the market and offer similar products or services at competitive prices, it increases the overall supply in the market.
This increased competition reduces the market share and pricing power of the cartel members, as consumers have more options to choose from.
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The behavior of buyers and sellers in a market is represented by the following demand and supply functions:
Q
D
=100−2p
Q
S
=−20+4p
What is the equilibrium price that makes Q
D
=Q
S
? What is the equilibrium quantity?
p∗=30,Q∗=40
p∗=20,Q∗=60
p∗=30,Q∗=100
We do not have enough information to answer this question
To find the equilibrium price and quantity, we need to set the demand and supply functions equal to each other. So, we have:
QD = QS
100 - 2p = -20 + 4p
Adding 2p to both sides:
100 = -20 + 6p
Adding 20 to both sides:
120 = 6p
Dividing both sides by 6:
p = 20
Now, substitute the equilibrium price (p = 20) into either the demand or supply function to find the equilibrium quantity:
QD = 100 - 2(20)
QD = 100 - 40
QD = 60
Therefore, the equilibrium price that makes
QD = QS is p*
= 20, and the equilibrium quantity is Q* = 60.
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What could happen to the US economy and military if we could not make high tech devices because we did not have access to rare earth metals? Should our government consider this when negotiating trade deals with this country? Are there any other countries with rare earth metals underground that are not being developed?
Lack of access to rare earth metals would have significant implications for the US economy and military. It would hinder high-tech industries, disrupt supply chains, impact national security, and limit technological advancements. The government should consider this factor when negotiating trade deals and explore options to ensure a stable supply, including partnerships and domestic development.
If the United States could not make high-tech devices due to a lack of access to rare earth metals, it would have significant implications for both the economy and the military.
Economic Implications:
1. High-Tech Industries: High-tech industries heavily rely on rare earth metals for the production of various advanced technologies such as smartphones, computers, electric vehicles, renewable energy systems, and defense equipment.
2. Supply Chain Disruptions: Rare earth metals are essential components in global supply chains. If the US lacks access to these metals, it would face disruptions in the supply of critical components, affecting not only high-tech industries but also other sectors dependent on these technologies.
Military Implications:
1. Defense Technologies: Rare earth metals are vital for the development of advanced defense technologies, including radar systems, missile guidance systems, satellite communications, and precision-guided munitions.
2. Dependence on Foreign Sources: A lack of domestic rare earth metal production would increase dependence on foreign sources, potentially creating vulnerabilities in the supply chain for defense technologies.
Considering these implications, it is crucial for the US government to consider access to rare earth metals when negotiating trade deals. Ensuring a stable and reliable supply of these metals should be a priority, either through domestic production or strategic partnerships with countries possessing rare earth deposits.
While China currently dominates the global rare earth market, there are other countries with significant reserves that are not fully developed. Some notable examples include Australia, Russia, Brazil, Canada, and Vietnam
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Provide three examples of organizations in the hospitality industry that use market-penetration pricing. Give the organizational names, what their pricing strategies are, how long the organization has been providing this scale of pricing, and at what level the strategy has captured the customer audience.
Identify and explain what promotional pricing provides to customer value. What hospitality companies have captured your business by purchasing their product/service through this pricing strategy?
Various organizations in the hospitality industry utilize this pricing strategy, including Premier Inn, Taco Bell, and McDonald's.
Market-penetration pricing is a strategy that a firm can use to attract customers by selling their products or services at lower prices. Premier Inn is one of the organizations in the hospitality industry that use market-penetration pricing. They offer affordable hotel accommodations at low prices. The company has been offering this pricing scale for a long time, and its strategy has captured the customer audience looking for a budget-friendly option.
Taco Bell is another organization in the hospitality industry that utilizes market-penetration pricing. The company offers food products at lower prices than its competitors. Taco Bell has been utilizing this pricing strategy for a while, and it has helped them to attract customers who are looking for affordable fast-food options.
McDonald's is another hospitality industry organization that utilizes market-penetration pricing. They sell fast-food items at lower prices than their competitors. This pricing strategy has helped McDonald's to attract a large customer audience that is looking for budget-friendly food options.
Promotional pricing offers several benefits to customers. First, it enables customers to save money on their purchases. Second, it provides an opportunity for customers to try out new products or services at a lower cost. Finally, it enables customers to purchase more products or services at a lower cost.
In the hospitality industry, promotional pricing is a common strategy companies use to attract new customers. For instance, hotels can offer discounts on room rates or provide free breakfast for guests who book their rooms during specific periods. This strategy can help hotels to attract new customers who are looking for budget-friendly options. Restaurants can also use promotional pricing to attract customers. For example, they can offer discounts on menu items during off-peak hours to encourage more customers to visit their restaurants.
Market-penetration pricing is a pricing strategy that is used by organizations in the hospitality industry to attract customers by offering their products or services at lower prices. Premier Inn, Taco Bell, and McDonald's are three examples of organizations that utilize this pricing strategy.
Promotional pricing provides customer value by enabling customers to save money, try new products, and purchase more products or services at a lower cost. Many companies in the hospitality industry use promotional pricing to attract new customers, and it can be an effective strategy if implemented correctly.
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The Tool That Is Especially Useful As A Political Device For Getting People To Prioritize Their Efforts And Focus First On The Biggest Quality Problems An Organization Faces Is: A. Pareto Diagram B. Flow-Chart C. Fishbone D. Histogram
The tool that is especially useful as a political device for getting people to prioritize their efforts and focus first on the biggest quality problems an organization faces is:
a. Pareto diagram
b. Flow-Chart
c. Fishbone
d. Histogram
The tool that is especially useful as a political device for getting people to prioritize their efforts and focus first on the biggest quality problems an organization faces is the Pareto diagram (option a).
The Pareto diagram is a visual representation of data that helps identify and prioritize the most significant issues or causes based on the Pareto principle, also known as the 80/20 rule. The principle states that roughly 80% of the effects come from 20% of the causes. In the context of quality improvement, it means that a few key problems or causes are responsible for the majority of quality issues.
The Pareto diagram presents data in a bar chart, with the bars arranged in descending order of frequency or impact. The diagram also includes a cumulative percentage line, showing the cumulative contribution of each category. This visual representation allows stakeholders to quickly identify and prioritize the most critical issues that require immediate attention.
As a political device, the Pareto diagram can be used to garner support and drive action by highlighting the significant problems that need to be addressed.
By visually demonstrating the distribution of problems and focusing on the few vital issues, it can help rally support and create a sense of urgency among stakeholders. It enables discussions and decision-making based on objective data, facilitating consensus and cooperation in tackling the organization's quality problems effectively.
While flow-charts, fishbone diagrams, and histograms are valuable tools in quality management, they do not specifically emphasize the prioritization of efforts and the identification of the biggest quality problems like the Pareto diagram does.
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The balance sheet of Colton Corporation shows long-term debt of $50 million and shareholder equity of $50 million, while their income statement shows EBIT of $14.1 million and interest expenses of $5 million. If Colton has a tax bracket of 40%, what is their return on equity (ROE)? Your answer should be between 8.94 and 17.46, rounded to 2 decimal places, with no special characters.
The return on equity (ROE) of Colton Corporation is 10.92%.
To calculate the return on equity (ROE), we need to determine the net income first. We can start by calculating the taxable income.
Taxable Income = EBIT - Interest Expenses
Taxable Income = $14.1 million - $5 million
Taxable Income = $9.1 million
Next, we calculate the net income by subtracting the taxes from the taxable income.
Net Income = Taxable Income - (Tax Rate * Taxable Income)
Net Income = $9.1 million - (0.40 * $9.1 million)
Net Income = $9.1 million - $3.64 million
Net Income = $5.46 million
Now, we can calculate the return on equity (ROE) using the formula:
ROE = Net Income / Shareholder Equity
ROE = $5.46 million / $50 million
ROE = 0.1092 or 10.92%
Rounded to 2 decimal places, the return on equity (ROE) for Colton Corporation is 10.92%.
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Give one example of any brand that has a different marketing approach abroad. (For instance, McDonald in India does not sell beef burgers due to religious reasons.)
National competitive advantage is an assessment of a nation’s ability to participate competitively in international markets. Choose any two (2) factors and elaborate with examples.
The marketing approach of these brands emphasizes their adherence to Islamic principles and their support for charitable causes, which resonates with the local population.
One factor of national competitive advantage is human resources. Countries with a highly skilled and educated workforce have an advantage in industries that require specialized knowledge and expertise. For example, Germany is known for its strong engineering and manufacturing skills. This has contributed to the country's competitive advantage in the automotive industry, with renowned brands like BMW, Mercedes-Benz, and Volkswagen leading the market. The availability of skilled workers enables German companies to innovate, produce high-quality vehicles, and maintain a competitive edge in the global automotive market.
Another factor of national competitive advantage is technological infrastructure. Countries that have advanced infrastructure, including reliable transportation networks, communication systems, and access to the internet, can support the efficient flow of goods, information, and services. South Korea is recognized for its advanced technological infrastructure, particularly in the field of electronics. Companies like Samsung and LG have leveraged the country's well-developed infrastructure to establish themselves as global leaders in the consumer electronics industry. The reliable infrastructure enables efficient production, distribution, and connectivity, giving South Korean companies a competitive advantage in the global marketplace.
Overall, human resources and technological infrastructure are two examples of factors that contribute to a country's national competitive advantage and its ability to participate competitively in international markets.
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A recycling plant has just signed a contract to provide 2000 tons of recycled mettle per week. The owner suspects he will need to speed up the process to fulfill the promised volume within the normal 40-hour work week. However, in the meantime he is willing to pay overtime to meet the contract. All stations have to be manned for safety reasons so as long as the plant is operating all works must be present. How many overtime hours will the plant be operating per week initially (Most nearly)?
Time Per Ton Description Step
1.0minutes Load on belt 1
2 Stripe non-mettles 1.5 minutes
3 Degrease and clean 0.8 minutes
4 Mills and reduce bulk 1.6 minutes
5 Pack and store 1.2 minutes
O 8 hours/week
O 10.5 hours/week
O 13.3 hours/week
O 15 hours/week
O 18.3 hours/week
Given that the recycling plant has signed a contract to provide 2000 tons of recycled metal per week. The owner suspects he will need to speed up the process to fulfill the promised volume within the normal 40-hour work week. All stations have to be manned for safety reasons so as long as the plant is operating all works must be present.
The owner is willing to pay overtime to meet the contract. However, all stations have to be manned for safety reasons so as long as the plant is operating all works must be present. Therefore, the total hours required to meet the target will be more than 40 hours per week.Initially, the plant will be operating for 15 hours per week.
First, we have to calculate the total time required per ton. Total time per ton = 1.0 + 1.5 + 0.8 + 1.6 + 1.2Total time per ton = 6.1 minutes = 0.1017 hours (1 minute = 0.0167 hours)The plant needs to process 2000 tons per week.
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IMP Energy Solutions issued outstanding bonds 8 years ago, with original maturity of 30 years, 10 years of call protection, par value of $1,000, coupon rate of 12%, and a call price of $1,075. In a recent trade, the bonds sold for $1,250. Assuming interest rates do not change from current levels, what yield should an investor buying IMP's bonds expect to earn?
a) 2.24%
b) 3.12%
c) 2.69%
d) 11.13%
e) 11.05%
The yield that an investor buying IMP Energy Solutions' bonds should expect to earn is approximately 2.69% (Option C).
To calculate the yield, we need to use the formula for yield to call (YTC). YTC is the yield an investor would earn if the bond is called at the earliest call date. In this case, the call protection period is 10 years, so the earliest call date would be 10 years from the issue date.
Step 1: Calculate the number of remaining years until the earliest call date.
Remaining years = original maturity - call protection period
Remaining years = 30 - 10
Remaining years = 20
Step 2: Calculate the annual coupon payment.
Annual coupon payment = Coupon rate * Par value
Annual coupon payment = 12% * $1,000
Annual coupon payment = $120
Step 3: Calculate the total cash inflow at the call date.
Total cash inflow = Call price + (Annual coupon payment * Remaining years)
Total cash inflow = $1,075 + ($120 * 20)
Total cash inflow = $1,075 + $2,400
Total cash inflow = $3,475
Step 4: Calculate the yield to call (YTC).
YTC = (Total cash inflow / Bond price) ^ (1 / Remaining years) - 1
YTC = ($3,475 / $1,250) ^ (1 / 20) - 1
YTC ≈ 0.087799 ^ 0.05 - 1
YTC ≈ 1.0288 - 1
YTC ≈ 0.0288
Step 5: Convert the yield to a percentage.
Yield = YTC * 100
Yield ≈ 0.0288 * 100
Yield ≈ 2.88%
Therefore, the yield that an investor buying IMP Energy Solutions' bonds should expect to earn is approximately 2.88%. The closest option to this yield is 2.69% (Option c).
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What is the most common type of credit?
a) Unsecured Personal Credit Line
b) Home Equity Credit Line
c) Overdraft Protection
d) Secured Personal Line of Credit
The use of consumer loans will normally
An unsecured Personal Credit Line is the most common type of credit. False. The use of consumer loans will normally decrease your net worth over time, while the use of investment debt has the potential to increase your net worth. Options a and b are correct.
a) Unsecured Personal Credit Line is the most common type of credit. This type of credit does not require any collateral and is typically based on the borrower's creditworthiness and income. It provides flexibility for borrowers to access funds as needed, up to a predetermined credit limit.
Unsecured personal credit lines are often used for various purposes such as financing personal expenses, managing cash flow, or covering unexpected expenses. They can be revolving, allowing borrowers to repay and reuse the credit line as needed.
b) False. The use of consumer loans, such as personal loans or credit card debt, generally involves borrowing for personal expenses or consumption. These loans typically come with interest charges and fees, which can decrease your net worth over time if not managed properly.
On the other hand, the use of investment debt, such as borrowing to finance investments in stocks, real estate, or businesses, has the potential to increase your net worth. This is because investments have the possibility of generating returns or appreciating in value over time, which can outweigh the costs of the debt. However, it is important to note that investment debt carries risks, and returns are not guaranteed, so careful consideration and risk assessment should be done before taking on investment debt.
Options a and b are correct.
Complete question:
What is the most common type of credit?
a) Unsecured Personal Credit Line
b) Home Equity Credit Line
c) Overdraft Protection
d) Secured Personal Line of Credit
The use of consumer loans will normally decrease your net worth over time whereas the use of investment debt will
normally increase your net worth.
a) true
b) false
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The Football shop sells football jerseys for $200 per unit. The unit variable cost per jersey is $140. Fixed costs total $8,400 per month. Required: a. What is the contribution margin per unit? b. What is the breakeven point in units? per unit units c. How many units must be sold to earn a profit of $15,000? d. What is the contribution margin ratio? e. What is the breakeven point in dollar sales? units units dollars f. What is the safety margin in dollar sales if the budgeted sales in units are 200 jerseys per month? units
The answer to the given question is:a. The contribution margin per unit is $60.b. The breakeven point in units is 140 units.c. 390 units must be sold to earn a profit of $15,000.d. The contribution margin ratio is 30%.e. The breakeven point in dollar sales is $28,000.f. The safety margin in dollar sales if the budgeted sales in units are 200 jerseys per month is $12,000.
a. The contribution margin per unit is obtained by subtracting the variable cost from the selling price. Contribution margin per unit = $200 - $140 = $60.b. Breakeven point is the point at which the company neither earns a profit nor incurs a loss. It is obtained by dividing the total fixed costs by the contribution margin per unit.Breakeven point in units = $8,400 ÷ $60 = 140 units.c. To determine the units that must be sold to earn a profit of $15,000, the formula is given below:Profit = (Contribution Margin x Units Sold) - Fixed Costs$15,000 = ($60 x Units Sold) - $8,400$60 x Units Sold = $23,400Units Sold = $23,400 ÷ $60 = 390 unitsd. The contribution margin ratio is calculated by dividing the contribution margin by the selling price.
Contribution Margin Ratio = ($200 - $140) ÷ $200 = 0.3 or 30%.e. The breakeven point in dollar sales can be calculated by multiplying the breakeven point in units by the selling price. Breakeven Point in Dollar Sales = 140 units x $200 = $28,000.f. Safety margin in dollar sales is the excess of budgeted sales over the breakeven sales. It can be calculated by multiplying the budgeted sales by the selling price and subtracting the breakeven sales. Budgeted Sales = 200 units x $200 = $40,000Safety Margin in Dollar Sales = ($40,000 - $28,000) = $12,000Therefore, the answer to the given question is:a. The contribution margin per unit is $60.b. The breakeven point in units is 140 units.c. 390 units must be sold to earn a profit of $15,000.d. The contribution margin ratio is 30%.e. The breakeven point in dollar sales is $28,000.f. The safety margin in dollar sales if the budgeted sales in units are 200 jerseys per month is $12,000.
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Period
Cash Flow
0
- $2000,00
1
$65,000
2
$65,000
3
$65,000
4
$65,000
5
$65,000
Calculate the following:
i. Modified internal rate of return, assuming reinvestmenT AT
15%
The modified internal rate of return (MIRR) is a financial metric used to determine the discount rate at which the future cash inflows from an investment are equal to the initial cash outflow plus the compounded future value of costs. In this case, we are given a cash flow with an initial outflow of $2000 in period 0 and inflows of $65,000 in periods 1-5.
We are also provided with a reinvestment rate of 15% and a total investment period of 5 years.
To calculate the MIRR, we first determine the present value of the negative cash flows, which amounts to $6,704.40, considering the investment cost compounded at the financing rate.
Then, we find the future value of the positive cash flows, which totals $128,095.32, considering the cash inflows compounded at the reinvestment rate.
Using the MIRR formula, MIRR = [(FV of positive cash flows) / (PV of negative cash flows)] ^ (1 / n) - 1, we substitute the values and calculate the MIRR to be approximately 84.73% when reinvesting at 15%.
Therefore, the modified internal rate of return (MIRR) for the given cash flow, assuming reinvestment at 15%, is 84.73% (approximate).
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