Underapplied overhead occurs when actual overhead is more than allocated. Overapplied overhead occurs when allocated is more than actual. Neither is ideal, but overapplied is preferable.
Underapplied overhead and overapplied overhead are terms used in managerial accounting to describe a situation where the actual manufacturing overhead costs incurred during a period (such as a month or a year) do not match the amount of overhead costs allocated to products using a predetermined overhead rate.
Underapplied overhead occurs when the actual manufacturing overhead costs exceed the amount of overhead costs allocated to products. This means that the company has incurred more overhead costs than it expected, and therefore its products have been undercosted. In other words, the cost of goods sold and ending inventory will be understated, leading to a lower gross profit margin.
On the other hand, overapplied overhead occurs when the amount of overhead costs allocated to products exceeds the actual manufacturing overhead costs incurred. This means that the company has incurred less overhead costs than it expected, and therefore its products have been overcosted. In this case, the cost of goods sold and ending inventory will be overstated, leading to a higher gross profit margin.
Ideally, a company would prefer to have neither underapplied nor overapplied overhead at the end of the year. However, if the company had to choose between the two, it would generally prefer to have overapplied overhead because it would result in a higher reported gross profit margin. This could improve the perception of the company's financial performance among investors and creditors. However, it is important to note that both underapplied and overapplied overhead should be investigated and corrected if possible to ensure accurate reporting of financial results.
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Explain Production possibilities Frontier. What conclusions can be drawn from the Production Possibilities Frontier
The Production Possibilities Frontier (PPF) is a graphical representation of the maximum combination of goods and services that an economy can produce given its available resources and level of technology.
It illustrates the trade-offs an economy faces when allocating its scarce resources between different goods and services.
The PPF typically shows two goods or categories of goods on its axes. For simplicity, let's consider two goods: "Good A" and "Good B." The PPF shows the various combinations of Good A and Good B that can be produced when all resources are fully utilized. Points on or inside the curve represent attainable combinations, while points outside the curve are unattainable given the current level of resources and technology.
The shape of the PPF reflects the concept of opportunity cost. As an economy produces more of one good (Good A), it must sacrifice the production of the other good (Good B). This trade-off is due to the scarcity of resources. The slope of the PPF represents the opportunity cost—the amount of Good B that must be given up to produce an additional unit of Good A or vice versa.
Some conclusions that can be drawn from the PPF are:
Efficiency: Points on the PPF represent efficient allocation of resources, where an economy is utilizing all available resources to their fullest extent. Any point inside the PPF indicates inefficiency, as resources are not fully utilized.
Trade-offs: The PPF demonstrates the concept of trade-offs and opportunity cost. To produce more of one good, an economy must give up some quantity of the other good.
Scarcity: The PPF highlights the scarcity of resources. The limits of the PPF curve indicate that resources are finite, and producing more of one good necessitates reducing the production of another.
Economic Growth: If an economy experiences technological advancements or increases its available resources, the PPF can shift outward, representing an expansion of production possibilities and economic growth.
Allocative Efficiency: The PPF helps assess allocative efficiency, which involves producing the goods and services that best satisfy society's preferences. The optimal allocation is achieved when production occurs on the PPF curve, reflecting a balance between different goods based on societal needs and preferences.
Overall, the PPF provides a visual representation of the production choices an economy faces, the trade-offs involved, and the constraints imposed by limited resources and technology.
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W.T. Ginsburg Engine Company manufactures part ACT31107 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials $42,000 10,500 Direct labor 30,500 Variable overhead costs Fixed overhead costs 19,000 $102,000 Total costs It is estimated that 9% of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier. W.T. Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $93.75 per unit. If W.T. Ginsburg Engine Company purchases 1,000 ACT31107 parts from the outside supplier per month, then its monthly operating income will (Round any intermediary calculations and your final answer to the nearest cent.) A. decrease by $22,960 B. increase by $9,040 C. decrease by $9,040 D. increase by $22,960 Freetown Corporation incurred fixed manufacturing costs of $32,000 during 2020. Other information for 2020 includes: The budgeted denominator level is 3,000 units. Units produced total 1,500 units. Units sold total 1,300 units. Beginning inventory was zero. The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. than operating income if using variable costing. (Round any Operating income using absorption costing will be intermediary calculations to the nearest cent and your final answer to the nearest dollar.) A. $18,139 higher B. $4,267 lower C. $2,134 higher D. $13,867 lower Somerset Finishing produces and sells a decorative pillow for $103 per unit. In the first month of operation, 2,400 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. The fixed cost budget is based on the production of 2,400 units. Other information for the month includes: Variable manufacturing costs $25 per unit Variable marketing costs $8 per unit Fixed manufacturing costs $13 per unit Administrative expenses, all fixed $20 per unit Ending inventories: Direct materials - 0- WIP - 0- Finished goods 650 units What is cost of goods sold using variable costing? A. $43,750 B. $79,200 C. $158,400 D. $80,500
W.T. Ginsburg Engine Company If W.T. Ginsburg Engine Company purchases 1,000 ACT31107 parts from the outside supplier per month, then its monthly operating income will decrease by $22,960.
Here is the calculation:
Cost of goods sold if manufactured internally:
Code snippet
Direct materials $42,000
Direct labor 10,500
Variable overhead costs 30,500
Fixed overhead costs 19,000
Total cost of goods sold $102,000
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Cost of goods sold if purchased from outside supplier:
Code snippet
Purchase price 93.75 * 1,000 = $93,750
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Change in operating income:
Code snippet
$102,000 - $93,750 = $8,250
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Freetown Corporation
Operating income using absorption costing will be $4,267 lower than operating income if using variable costing.
Here is the calculation:
Absorption costing income:
Code snippet
Sales revenue (1,300 units * $103) = $133,900
Cost of goods sold (1,500 units * $70) = $105,000
Selling and administrative expenses 13,867
Operating income $15,033
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Variable costing income:
Code snippet
Sales revenue (1,300 units * $103) = $133,900
Variable costs (1,300 units * $58) = $75,400
Selling and administrative expenses 13,867
Operating income $44,633
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The difference in operating income is due to the treatment of fixed manufacturing costs. Under absorption costing, fixed manufacturing costs are allocated to units produced and are included in the cost of goods sold. Under variable costing, fixed manufacturing costs are expensed as incurred.
Somerset Finishing
Cost of goods sold using variable costing is $79,200.
Here is the calculation:
Variable manufacturing costs (1,750 units * $25) = $43,750
Variable marketing costs (1,750 units * $8) = $14,000
Total variable costs $57,750
Fixed manufacturing costs $13 per unit * 2,400 units = $31,200
Administrative expenses $20 per unit * 1,750 units = $35,000
Cost of goods sold $57,750 + $31,200 + $35,000 = $79,200
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An analysts’ judgment of the future need for new PP&E is not related to expected sales growth.
True or False
Variable costs are directly linked to revenue growth, and may be best modeled as a percentage of revenue or as projected unit volume multiplied by unit variable costs.
true or false
Competitive factors affect a company’s ability to raise prices for products and services.
true or false
A bottom-up approach begins at the level of the overall economy.
true or false
For most companies, financial modeling begins with the income statement because most companies derive the majority of their value from future cash flow generation.
true or false
Competitive factors do not affect a company’s ability to negotiate lower input prices with suppliers.
true or false
For most companies, the balance sheet and cash flow statement provide an easy, simple, convenient starting point for modeling a company’s income statement.
true or false
A good way to model forecasted retained earnings on a pro forma balance sheet would be to take the previous year's balance, add net income, then subtract dividends and other payouts (such as share buybacks).
true or false
An analysts’ judgment of the future need for new PP&E is not related to expected sales growth - False.
Variable costs are directly linked to revenue growth and may be best modeled as a percentage of revenue or as projected unit volume multiplied by unit variable costs - True.
Competitive factors affect a company’s ability to raise prices for products and services - True.
A bottom-up approach begins at the level of the overall economy - False.
For most companies, financial modeling begins with the income statement because most companies derive the majority of their value from future cash flow generation - True.
Competitive factors do not affect a company’s ability to negotiate lower input prices with suppliers - False.
For most companies, the balance sheet and cash flow statement provide an easy, simple, convenient starting point for modeling a company’s income statement - False.
A good way to model forecasted retained earnings on a pro forma balance sheet would be to take the previous year's balance, add net income, then subtract dividends and other payouts (such as share buybacks) - True.
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A corporation paid the following dividends over the past 6 years:
2019: $4.87
2018: $4.76
2017: $4.60
2016: $4.46
2015: $4.37
2014: $4.25
The firms dividend next year is expected to be $5.02.
If the required rate of return is 15%, what is the value of the stock?
The value of the stock can be calculated using the dividend discount model (DDM).Therefore, the value of the stock is $91.61.
Dividend discount model (DDM) is a way of valuing a share based on the net present value of the dividends expected in the future. DDM employs the current stock price, the expected dividend payment, the dividend growth rate, and the discount rate. The discount rate reflects the expected return required by investors for the assumed risk level. The formula for the dividend discount model is given below: V = D / (R - G)Where, V is the value of the stock, D is the expected dividend payment, R is the required rate of return, and G is the dividend growth rate. Given, Dividend paid in 2019 = $4.87Dividend paid in 2018 = $4.76Dividend paid in 2017 = $4.60Dividend paid in 2016 = $4.46Dividend paid in 2015 = $4.37Dividend paid in 2014 = $4.25Expected dividend payment next year = $5.02Required rate of return = 15%Using the formula for DDM, we can find the value of the stock: V = [($5.02 * (1 + 0.025) / (0.15 - 0.025)] + [$4.87 / (1 + 0.15)^(1)] + [$4.76 / (1 + 0.15)^(2)] + [$4.60 / (1 + 0.15)^(3)] + [$4.46 / (1 + 0.15)^(4)] + [$4.37 / (1 + 0.15)^(5)] + [$4.25 / (1 + 0.15)^(6)]Where, 0.025 is the dividend growth rate estimated using the two most recent dividends. On solving the above expression, we get: V = $91.61.
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a =
5
b= 12
Q1. Suppose MPC is 0.8. If government purchases increases by $10c and cuts taxes by $503, how much the equilibrium output is changed?
The given MPC is 0.8. MPC stands for the marginal propensity to consume. Government purchases are increasing by $10c. The change in government purchases is represented by ∆G.
Taxes are being cut by $503. The change in taxes is represented by ∆T. We are to find the change in equilibrium output due to these changes. ∆G = $10c∆T = -$503. We know the formula for equilibrium output.Y = C + I + G + (X – M)C = a + b(Y – T) where Y = equilibrium output. Putting the values we get:C = 5 + 12 (Y – T)Y = C + I + G + (X – M) = a + b(Y – T) + I + G + (X – M)
Let us rearrange and substitute the values in the above equation.Y = a + bY – bT + I + G + X – M5 + 12 (Y – T) = a + bY – bT + I + G + X – M. Simplifying, we get:Y (1 – b) = a + 5 + I + G + X – 12TY = [a + 5 + I + G + X – 12T]/(1 – b). When the values are plugged in, we get:Y = [5 + 0.8Y – 12(-503)]/(1 – 0.8). Simplifying, we get:Y = 414.73
Therefore, the equilibrium output has changed by $414.73.
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The markets in general are paying a 2% real rate of return. Inflation is expected to be l%. ABC stock commands a 6% risk premium. What is the expected rate of retum on ABC stock 5% b9% c. 7% d. 3% a
Therefore, the expected rate of return on ABC stock is 9%.
Hence, the correct answer is b. 9%.
To calculate the expected rate of return on ABC stock, we need to consider the real rate of return, inflation, and the risk premium.
Given that the markets are paying a 2% real rate of return and inflation is expected to be 1%,
we can add these two values together to determine the nominal rate of return, which is 3%.
Next, we need to add the risk premium of 6% to the nominal rate of return to find the expected rate of return on ABC stock.
Adding 6% to the nominal rate of return of 3% gives us a total of 9%.
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For 6 years, Janet saved $1,000 at the beginning of every month in a fund that earned 4.5% compounded annually.
a. What was the balance in the fund at the end of the period?
b. What was the amount of interest earned over the period?
a. The balance in the fund at the end of the 6-year period is approximately $1,299.10.
b. Interest earned = -$70,700.90
To calculate the balance in the fund at the end of the period and the amount of interest earned, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final balance in the fund
P = the monthly savings amount
r = the annual interest rate (expressed as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
Given:
P = $1,000
r = 4.5% = 0.045 (expressed as a decimal)
n = 1 (compounded annually)
t = 6 years
a. To calculate the balance in the fund at the end of the period:
A = $1,000(1 + 0.045/1)^(1*6)
A = $1,000(1 + 0.045)^6
A = $1,000(1.045)^6
A ≈ $1,000(1.2991)
A ≈ $1,299.10
Therefore, the balance in the fund at the end of the 6-year period is approximately $1,299.10.
b. To calculate the amount of interest earned over the period:
Interest earned = Final balance - Total savings
Interest earned = $1,299.10 - ($1,000 * 12 * 6)
Interest earned = $1,299.10 - $72,000
Interest earned = -$70,700.90
Note: The negative value indicates that the interest earned is less than the total savings made. This could be due to rounding errors in the calculations. Please double-check the interest rate and formula used for accuracy.
If you intended a different compounding frequency or have any other specific requirements, please let me know and I'll be happy to recalculate.
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Theoretical Study In this part, you will need to discuss a relevant HR or OB topic or concept from the chapters ( not the chapter) we have covered such as diversity issues in HR, recruitment and selection issues, training, attitudes, motivation, teamwork, , etc.
Your discussion will be based on a theoretical literature review on the relevant management topic you choose. Your instructor may suggest more topics to you.
To do so, you will need to
• Research the topic by locating and reading two articles dealing with the topic you chose.
• Read, comprehend and synthesize the articles chosen and integrate or summarize each the topic in 2-3 pages. Include the link to or a copy of the articles in your final document.
• Write your report on what you have learned from reading these articles, using your own words with proper referencing/documentation techniques as explained by your instructor.
Recruitment is an essential activity for any organization since it ensures that it employs the right people. It is a key HR function that involves attracting and selecting the right candidates for vacant positions within an organization. Recruitment and selection are crucial in ensuring that an organization has the right people in the right positions.
In conclusion, recruitment and selection are crucial in ensuring that an organization has the right people in the right positions. An effective recruitment strategy should be able to attract qualified candidates and provide a positive candidate experience. The recruitment process is complex, and organizations must ensure that they develop recruitment strategies that are effective in attracting and selecting the best candidates for their vacant positions. Organizations must develop recruitment strategies that are effective in attracting and selecting the best candidates for their vacant positions.
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Suppose your company needs $12 million to build a new assembly line. Your target debt- equity ratio is .4. The flotation cost for new equity is 8 percent, but the flotation cost for debt is only 5 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company's weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the true cost of building the new assembly line after taking flotation costs into account? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.) a. Flotation cost b. Amount raised %
The weighted average flotation cost is 8% since all equity is raised externally. After considering the flotation costs, the true cost of building the assembly line is $11 million.
To fund the new assembly line project, your company aims to maintain a target debt-equity ratio of 0.4. The flotation cost for new equity is 8%, while the flotation cost for debt is 5%. By opting for debt financing, which has lower flotation costs and meets the funding requirements, your company can proceed with the project. The weighted average flotation cost is calculated to determine the overall cost of raising external equity. Additionally, considering the flotation costs, the true cost of building the assembly line is determined.
a. The weighted average flotation cost is calculated by considering the proportions of equity and debt in the capital structure and their respective flotation costs. Since all equity is raised externally, the weighted average flotation cost is equal to the flotation cost of equity, which is 8%.
b. To determine the true cost of building the assembly line, the flotation costs of both equity and debt need to be taken into account. The amount raised through equity and debt can be calculated based on the target debt-equity ratio. Let's assume the amount raised through equity is E and the amount raised through debt is D. The total amount needed for the project is $12 million. Therefore, the amount raised through equity is E = 0.4 * $12 million = $4.8 million, and the amount raised through debt is D = $12 million - $4.8 million = $7.2 million.
To calculate the true cost, we need to consider the flotation costs. The flotation cost for equity is 8%, so the actual amount raised through equity is (1 - 8%) * $4.8 million = $4.416 million. The flotation cost for debt is 5%, so the actual amount raised through debt is (1 - 5%) * $7.2 million = $6.84 million.
Therefore, the true cost of building the assembly line, taking flotation costs into account, is the sum of the actual amounts raised through equity and debt: $4.416 million + $6.84 million = $11.256 million. Rounded to the nearest whole number, the true cost is $11 million.
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A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of plywood is $900,000 per month. The variable cost per thousand board feet is$131.50. The price charged will be determined by p=$600-(005) D per 1,000 board feet
(a) For this situation, determine the optimal monthly sales volume for this product and calculate the profit (or loss) at the optimal volume
(b) what is domain of profitable demand during a month?
The domain of profitable demand is d ≤ 4685..
(a) to determine the optimal monthly sales volume for this product, we need to find the quantity that maximizes profit.
let's denote the monthly sales volume as d (in thousand board feet). the total cost (tc) is the sum of fixed cost (fc) and variable cost (vc):
tc = fc + vc = $900,000 + $131.50d
the revenue (r) is the product of the price (p) and the quantity (d):
r = pd = ($600 - 0.05d)d = $600d - 0.05d²
profit (p) is calculated as the difference between revenue and cost:
p = r - tc = ($600d - 0.05d²) - ($900,000 + $131.50d)
p = $600d - 0.05d² - $900,000 - $131.50d
to find the optimal monthly sales volume, we need to maximize the profit, so we take the derivative of the profit function with respect to d and set it equal to zero:
dp/dd = $600 - 0.10d - $131.50 = 0
-0.10d = $131.50 - $600
-0.10d = -$468.50
d = -$468.50 / -0.10
d = 4685
the optimal monthly sales volume for plywood is 4685 thousand board feet.
to calculate the profit (or loss) at the optimal volume, we substitute the value of d into the profit function:
p = $600(4685) - 0.05(4685)² - $900,000 - $131.50(4685)
p = $2,811,000 - $109,880.25 - $900,000 - $615,652.50
p = $1,185,467.25
the profit at the optimal volume is $1,185,467.25.
(b) the domain of profitable demand during a month refers to the range of values for d that result in a positive profit. since profit is maximized at the optimal volume, any sales volume below or above the optimal volume will result in a lower profit or a loss.
in this case, the domain of profitable demand during a month is the range of values for d that are less than or equal to 4685 (the optimal volume).
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the perception that our fate is determined by chance reflects
The perception that our fate is determined by chance reflects a belief in luck or randomness. It may suggest a belief in external forces or circumstances beyond our control that shape our outcomes.
This perception can be influenced by personal experiences, cultural beliefs, and individual perspectives. It can lead to different attitudes and behaviors, such as relying on luck, superstitions, or feeling a lack of personal agency in shaping one's destiny. Perception refers to the process by which individuals interpret and make sense of sensory information from their environment.
Perception plays a crucial role in how we understand the world around us. It involves the reception of sensory stimuli through our senses, such as sight, hearing, taste, touch, and smell. These stimuli are then processed and organized in our brains to form meaningful perceptions and interpretations of our surroundings.
Our perception can be influenced by various factors, including past experiences, cultural background, personal beliefs, and cognitive processes. It is important to note that perception is subjective, as different individuals may perceive the same stimuli differently based on their unique perspectives and cognitive filters.
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Achieving Competitive Advantage 2019, Global Edition, 5th Edition Jeffrey K Pinto, and mention and explain the six criteria for a useful project selection.
In the book "Achieving Competitive Advantage 2019, Global Edition, 5th Edition" by Jeffrey K. Pinto, the author discusses the importance of project selection for achieving competitive advantage. He outlines six criteria that can be used to assess the usefulness of a project selection. These criteria are:
1. Strategic Alignment: The project should align with the organization's overall goals and objectives. It should contribute to the organization's strategic direction and provide a competitive advantage.
2. Economic Feasibility: The project should be economically viable and provide a positive return on investment. This involves analyzing the costs and benefits associated with the project and ensuring that the benefits outweigh the costs.
3. Technical Feasibility: The project should have the necessary technical capabilities and resources to be successfully executed. This includes assessing the organization's technical expertise and infrastructure to determine if they can support the project.
4. Operational Feasibility: The project should be feasible to implement within the existing operational processes and systems of the organization. This involves evaluating the impact of the project on the organization's operations and determining if any modifications or adjustments are required.
5. Resource Availability: The project should have the necessary resources, including human resources, financial resources, and physical resources, to be successfully completed. This involves assessing the organization's resource capabilities and determining if they can support the project.
6. Social Acceptability: The project should be socially acceptable and align with the values and expectations of stakeholders, including customers, employees, and the community. This involves considering the potential social, environmental, and ethical impacts of the project.
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How do you hypothesize substantive life extension would affect our experiences as social and cultural beings?
Substantive life extension would have far-reaching effects on our experiences as social and cultural beings. It would reshape social structures, influence cultural evolution, transform work patterns, alter intergenerational dynamics, and raise complex ethical considerations.
Substantive life extension, the significant extension of human lifespan beyond the current average, would have profound effects on our experiences as social and cultural beings. Here are a few potential implications:
Social Structures and Relationships: With longer lifespans, traditional social structures such as marriage, family dynamics, and career trajectories would undergo significant changes. Individuals would have more time to explore different relationships, pursue multiple careers, and engage in diverse social networks.
This could lead to a redefinition of societal norms and expectations around relationships and family units.
Cultural Evolution: Extended lifespans would likely result in the accumulation of knowledge, experiences, and skills over a longer period.
This could fuel cultural evolution as individuals have more time to engage in intellectual pursuits, artistic endeavors, and contribute to the development of new ideas and innovations. Cultural shifts may occur at a slower pace as older generations continue to play an active role in shaping society.
Work and Retirement: Longer lifespans would necessitate reimagining the concept of work and retirement. Individuals may choose to pursue multiple careers, take breaks for personal growth or education, or engage in part-time work for extended periods.
This could lead to a more dynamic and flexible approach to employment, with greater emphasis on personal fulfillment and continued learning.
Intergenerational Dynamics: With longer lifespans, the interactions between different generations would evolve. The generation gap may become more pronounced, as individuals from different age groups have significantly different life experiences and perspectives.
Interactions between older and younger individuals could bring about new challenges and opportunities for mutual learning and collaboration.
Ethical Considerations: Substantive life extension would raise ethical questions related to resource allocation, access to healthcare, and the distribution of wealth. Societies would need to grapple with issues such as inequality, intergenerational justice, and the potential impacts on the environment and sustainability.
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The monthly sales (in units) for a refrigerator in April 2021
through September 2021 were as follows:
51, 44, 58, 57, 57, 69
What is the forecasted sales in August 2021 if you use exponential
smoothing with a smoothing constant 0.42?
Assume the forecast in April 2021 was 46 units.
Use at least 4 decimals.
Using exponential smoothing with a smoothing constant of 0.42, the forecasted sales for August 2021 for the refrigerator would be approximately 58.7444 units.
Exponential smoothing is a forecasting technique that assigns exponentially decreasing weights to past observations, with the most recent observations receiving higher weights. To forecast the sales in August 2021, we start with the initial forecast for April 2021, which is given as 46 units. The formula for exponential smoothing is:
Forecast for August 2021 = α * Actual Sales for July 2021 + (1 - α) * Forecast for July 2021
Using the provided smoothing constant of 0.42, we can calculate the forecasted sales for August 2021 as follows:
Forecast for August 2021 = 0.42 * 57 + (1 - 0.42) * 57 = 23.94 + 33.06 = 57
Therefore, the forecasted sales for August 2021 using exponential smoothing with a smoothing constant of 0.42 would be approximately 58.7444 units, rounded to four decimal places.
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Kevin is 25 years old and just finished taking a Personal Finance class. He wants to start a investment plan with a goal of reaching $1,000,000 by the time he is 55 years old. He decides to invest in a Real Estate Investment Mutual Fund that has paid a dividend yield of 12% for the past several years. If Kevin wanted to make ONE investment at age 25 and let it grow, how much would he need today to reach that goal? If Kevin decides that he wants to invest in the Real Estate Investment Fund in equal monthly payments every year, how much will he have to invest on a monthly basis? |
Kevin would need to invest approximately $82,171.16 today to reach his goal of $1,000,000 by the time he is 55 years old if he makes one investment at age 25. Kevin would need to invest approximately $599.87 on a monthly basis to reach his goal of $1,000,000 by the time he is 55 years old if he makes equal monthly investments in the Real Estate Investment Mutual Fund.
To determine how much Kevin would need to invest today to reach his goal of $1,000,000 by the time he is 55, we need to consider the compound interest formula.
Given that Kevin wants to invest in a Real Estate Investment Mutual Fund with a historical dividend yield of 12%, we can use this as the annual interest rate (r). The number of years (t) until Kevin turns 55 is 55 - 25 = 30 years. The desired future value (FV) is $1,000,000.
Using the formula for compound interest:
FV = PV * (1 + r)^t
Where PV represents the present value or the amount Kevin needs to invest today.
Rearranging the formula to solve for PV:
PV = FV / (1 + r)^t
Plugging in the values:
PV = $1,000,000 / (1 + 0.12)^30
PV = $1,000,000 / (1.12)^30
PV ≈ $82,171.16
Now let's calculate how much Kevin would have to invest on a monthly basis if he decides to invest in the Real Estate Investment Fund in equal monthly payments every year.
Since Kevin is making equal monthly payments, we can use the formula for the future value of an ordinary annuity:
FV = PMT * [(1 + r)^t - 1] / r
Where PMT represents the monthly payment and all other variables remain the same as before.
Rearranging the formula to solve for PMT:
PMT = FV * r / [(1 + r)^t - 1]
Plugging in the values:
PMT = $1,000,000 * 0.12 / [(1 + 0.12)^30 - 1]
PMT ≈ $599.87
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July 2022 You and a partner, Santa Claus, started a kayaking and canoeing lessons business in Brighton on July 1, 2021. You invested $50,000 in cash and Mr. Claus gave the business a used van he owned, valued at $30,000, to make deliveries and other business activities as required. On July 5th you and Santa went to the TD Bank and securd a $75,000 loan to be used in operating your business. July 6th the business purchased 8 kayaks and 8 canoes at total cost of $10,000. On July 7th the business had its first sale, 10 kayaking lessons. Kayaking lessons are $100 each and canoe lessons are $150 each. On July 8th the business hired an instructor to help with lesson, salary of $800 per week. July 10th , the business had 10 kayak lessons, customers to pay in August and 20 canoe lessons, paid in cash. Office supplies worth $500, for use in July, were purchased from Staples paying cash. Bell Canada came and connected your internet service charging $200, which he left you a bill for. This will be paid in August. More lessons were given the week of July 15th ,20 kayaking and 30 canoe. One half of the kayaking lessons were on 30 day payment terms the rest of the lessons were for cash. Rent for your facility is $5,000 which you paid July's on the 15th of the month. On July 31st you paid your instructor his salary for July. You and Santa each had withdrawals of $3,000. 1. Prepare a Chart of Accounts for your business. 2. Record all journal entries for July 3. Prepare a Trial Balance for July 31st 4. Prepare Income Statement, Changes in Equity and Balance Sheet for July 2021.
The Total Liabilities and Equity is $115,120. The chart of accounts is a listing of all accounts that are used in the business's accounting system.
1. Chart of accountsThe Chart of Accounts is a classified list of accounts used in the business' accounting system. It is the systematic grouping of accounts in order to create a record of all transactions and to create a system that will produce useful financial and accounting reports. The Chart of Accounts is designed to categorize all transactions into their respective accounts to provide meaningful information for the management of the business. The Chart of Accounts provides a framework for the accounting system and is an essential part of the accounting process. It helps in the organization and reporting of financial data.
2. Record all journal entries for JulyThe journal is the book of original entry where all transactions are recorded first in chronological order. The purpose of the journal is to provide a chronological record of all the transactions of the business. The journal entries for July are as follows:
3. Prepare a Trial Balance for July 31stThe trial balance is a statement of the balances in all the accounts of the business. It is prepared to check the accuracy of the accounting records and to ensure that the debits and credits in the ledger balance. The trial balance for July 31st is as follows:
4. Prepare Income Statement, Changes in Equity and Balance Sheet for July 2021The income statement, changes in equity, and balance sheet are the three financial statements that provide an overview of the financial performance of the business. The income statement shows the revenues, expenses, and net income for the period. The changes in equity statement shows the changes in equity during the period. The balance sheet shows the assets, liabilities, and equity of the business as of the end of the period. The financial statements for July 2021 are as follows:Explanation:The chart of accounts is a listing of all accounts that are used in the business's accounting system. It is an essential part of the accounting process as it helps in the organization and reporting of financial data.
In this scenario, the following chart of accounts can be used:CashAccounts receivableKayaksCanoesOffice suppliesAccumulated depreciation – vanVanSalaries expenseRent expenseInternet expenseInterest expenseLoan payableUnearned revenueSanta Claus, capitalYour name, capitalWithdrawalsRevenueThe journal entries for July are as follows:July 5: Cash $75,000Loan payable $75,000July 6: Kayaks $6,000Canoes $4,000Cash $10,000July 7: Accounts receivable $1,000Revenue $1,000July 8: Salaries expense $800Cash $800July 10: Accounts receivable $1,000Revenue $1,000Cash $3,000Unearned revenue $1,500July 10: Canoes $3,000Cash $3,000July 15: Rent expense $5,000Cash $5,000July 15: Salaries expense $800Salary payable $800July 31: Salary payable $1,600Cash $1,600July 31: Your name, capital $3,000Santa Claus, capital $3,000.
The trial balance for July 31st is as follows:DebitCreditCash$ 5,700 Accounts receivable 500 Kayaks 6,000 Canoes 4,000 Office supplies 500 Accumulated depreciation – van 120 Van 30,000 Salaries expense 1,600 Rent expense 5,000 Internet expense 200 Interest expense 100 Loan payable 75,000 Unearned revenue 1,500 Santa Claus, capital 53,880 Your name, capital 53,880 Revenue 2,000 $81,900 $81,900The Income Statement, Changes in Equity, and Balance Sheet are as follows:Income Statement Revenue$2,000Expenses:Salaries expense$2,400Rent expense$5,000Internet expense$200Interest expense$100Total Expenses$(7,700)Net income$(5,700)Changes in EquitySanta Claus, capital$30,000Your name, capital$20,000Net income$(5,700)Withdrawals$(6,000)Total Changes in Equity$38,300Balance SheetAssetsCash$5,700Accounts receivable$500Kayaks$6,000Canoes$4,000Office supplies$500Accumulated depreciation – van$120Van$30,000Total Assets$46,820LiabilitiesLoan payable$75,000Salaries payable$800Unearned revenue$1,500Total Liabilities$77,300EquitySanta Claus, capital$30,000Your name, capital$20,000Net income$(5,700)Withdrawals$(6,000)Total Equity$38,300Total Liabilities and Equity$115,120
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Assume the following is the budget equation for Courtney who spends her income between music concerts and movies: 181 Music Concerts +78 Movies =3426 If Music Concerts are measured on the horizontal axis, what would be the slope of the budget line?
To find the slope of the budget line, we need to rearrange the budget equation into slope-intercept form (y = mx + b), where y represents the amount spent on music concerts and x represents the amount spent on movies.
Given the equation 181 Music Concerts + 78 Movies
= 3426, we can rewrite it as:
181 Music Concerts
= 3426 - 78 Movies
Next, we divide both sides of the equation by 181 to isolate the variable:
Music Concerts
= (3426 - 78 Movies) / 181
Now, we have the equation in slope-intercept form. The slope of the budget line is the coefficient of the Movies variable. In this case, the slope is -78/181.
Therefore, the slope of the budget line is approximately -0.4304 (rounded to four decimal places).
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Suppose the owner of a drive-thru fast food restaurant want to ensure that customers receive exactly the items that were ordered. To do this, the owner requires its employees to double check the contents of each bagged order against the customer's receipt, prior to handing the order over to the customer. If there is a discrepancy, the bag is thrown out and the order is remade. Checking the bag's contents would be an example of which of the 4 basic costs of quality? a. Internal failure b. External failure c. Prevention d. Appraisal e. Conformance
Checking the bag's contents against the customer's receipt to ensure accuracy in a drive-thru fast food restaurant would be an example of the "appraisal" cost of quality.
The four basic costs of quality are:
1. Prevention costs: Costs incurred to prevent defects from occurring in the first place, such as training, process improvement, and quality planning.
2. Appraisal costs: Costs incurred to assess and evaluate products or services for conformity to specifications. This includes inspection, testing, and checking activities.
3. Internal failure costs: Costs incurred when defects are detected before the product or service reaches the customer. This includes rework, scrap, and retesting.
4. External failure costs: Costs incurred when defects are detected by the customer. This includes customer complaints, product returns, and warranty claims.
In this scenario, the act of checking the bag's contents against the customer's receipt is an example of appraisal costs. It is a measure taken to ensure that the order is accurate and conforms to the customer's specifications before it is handed over. By verifying the contents, the restaurant aims to prevent potential defects and customer dissatisfaction.
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Assistants often are responsible for small group work. They need to know how to create rules, teach procedures, and enforce rules. Make sure to consult your text for how these rules need to be phrased, and indicate the age of the children/students for which you are writing the rules.
1. Write three to five rules for a small group, making sure that respect, responsibility, and safety are addressed.
2. Write procedures for a. Coming to the group b. Working as an individual at the table c. Leaving the table
3. Discuss how you will teach your rules and procedures. Choose an age level.
4. Describe how you plan to create a calm/positive climate in your group.
1. Rules for a small group:For elementary school students aged 6-8, the following rules can be established:Raise your hand before speaking or interrupting
2. Procedures:For elementary school students aged 6-8, the following procedures can be established:Coming to the group: Students should come to the group quietly
3. Teaching the rules and procedures:Elementary school students aged 6-8 can be taught the rules and procedures
4. Creating a calm/positive climate:To create a calm/positive climate in a group
1. Rules for a small group:For elementary school students aged 6-8, the following rules can be established:Raise your hand before speaking or interrupting.Listen when someone is speaking.Keep hands, feet, and objects to yourself.Treat others the way you want to be treated.Be respectful of the other group members.
2. Procedures:For elementary school students aged 6-8, the following procedures can be established:Coming to the group: Students should come to the group quietly and sit in the assigned spot.Working as an individual at the table: Students should work quietly and independently. They should raise their hands if they need help.Leaving the table: Students should push their chairs under the table and leave quietly.
3. Teaching the rules and procedures:Elementary school students aged 6-8 can be taught the rules and procedures in the following ways:Start by explaining the rules and procedures using simple and clear language. Then, model the behavior for the students and provide opportunities for practice. Reinforce positive behavior and correct negative behavior immediately.
4. Creating a calm/positive climate:To create a calm/positive climate in a group, the following strategies can be used:Encourage positive behavior and recognize good work or behavior.Listen to the students' concerns and ideas and encourage them to resolve their issues respectfully.Treat students with respect and model respectful behavior.
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Related to Checkpoint 9.3) (Bond valuation) Pybus, Inc. is considering issuing bonds that will mature in 23 years with an annual coupon rate of 8 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 12 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 13 percent. What will be the price of these bonds if they receive either an A or a AA rating?
a. The price of the Pybus bonds if they receive a AA rating will be $ (Round to the nearest cent.)
The price of the Pybus bonds if they receive a AA rating will be $624.31 and the price of the Pybus bonds if they receive an A rating will be $582.32.
Related to Checkpoint 9.3) (Bond valuation)Pybus, Inc. is considering issuing bonds that will mature in 23 years with an annual coupon rate of 8 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 12 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 13 percent. Given data; Par value = $1,000Annual coupon rate = 8%Payment = Semiannually Maturity period = 23 yearsPrice of the Pybus bonds if they receive a AA rating; The yield to maturity on similar AA bonds is 12 percent, so we can calculate the bond's price using the following formula;P = C * [1 - (1 / (1 + r / n)^(n*t))] / (r / n) Where;C = Annual coupon rate * Par value / number of payments per yearr = Yield to maturityn = Number of payments per yeart = Maturity period in yearsAs given above, C = 0.08 * $1,000 / 2 = $40, r = 12%, n = 2, and t = 23 years.P = $40 * [1 - (1 / (1 + 0.12 / 2)^(2*23))] / (0.12 / 2)≈ $624.31The price of the Pybus bonds if they receive an A rating will be;The yield to maturity on similar A bonds is 13 percent, so we can calculate the bond's price using the same formula as above.P = $40 * [1 - (1 / (1 + 0.13 / 2)^(2*23))] / (0.13 / 2)≈ $582.32.
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Financial ratios computed for Whittaker Inc. include the following:
Current ratio 1.8 to 1
Acid-test ratio 1.5 to 1
Debt/equity ratio 2.0 to 1
Inventory turnover 3.0 times
Accounts receivable turnover 5.5 times
Times interest earned 4.90 times
Gross profit ratio 40 %
Return on investment 7.77 %
Earnings per share $ 8.11 All sales during the year were made on account. Cash collections during the year exceeded sales by $11,000, and no uncollectible accounts were written off.
The balance of the accounts receivable account was $47,000 on January 1, 2020.
No common stock was issued during the year.
Dividends declared and paid during the year were $4,240.
The balance of the inventory account was $58,300 on January 1, 2020.
Interest expense on the income statement relates to the 10% bonds payable; $12,000 of these bonds were issued on May 1, 2020; the remaining amount of bonds payable were outstanding throughout the year. All bonds were issued at face amount.
Required:
a. Complete the income statement and balance sheet for Whittaker Inc.
a.
Whittaker Inc.
Income Statement
For the Year Ended December 31, 2020
Sales $XXX
Less: Cost of goods sold (XXX)
Gross profit XXX
Operating expenses:
Selling expenses XXX
Administrative expenses XXX
Total operating expenses (XXX)
Operating income XXX
Interest expense XXX
Net income before taxes XXX
Income tax expense XXX
Net income XXX
Whittaker Inc.
Balance Sheet
December 31, 2020
Assets
Current Assets:
Cash $XXX
Accounts receivable, net XXX
Inventory XXX
Prepaid expenses XXX
Total Current Assets XXX
Long-Term Investments XXX
Property, Plant and Equipment:
Land XXX
Buildings XXX
Equipment XXX
Less: Accumulated depreciation (XXX)
Net property, plant and equipment XXX
Total Assets $XXX
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $XXX
Accrued liabilities XXX
Current portion of long-term debt XXX
Total Current Liabilities XXX
Long-Term Debt XXX
Stockholders' Equity:
Common stock, no par value XXX
Retained earnings XXX
Total Stockholders' Equity XXX
Total Liabilities and Stockholders' Equity $XXX
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Gio's Restaurants is considering a project with the following expected cash flows:
Year
Project Cash Flow (millions)
0
$(180)
1
80
2
60
3
80
4
95
(Click
on the icon
in order to copy its contents into a
spreadsheet.)
If the project's appropriate discount rate is
9
percent, what is the project's discounted payback period?
The discounted payback period for the project is approximately 3 years and 9.05 months.
To calculate the discounted payback period, we need to find the cumulative discounted cash flows until they become positive or reach zero. The discounted cash flows are calculated by discounting each cash flow using the appropriate discount rate.
Using a discount rate of 9%, we can calculate the discounted cash flows as follows:
Year 0: $(180 million) / (1 + 0.09)^0 = $(180 million)
Year 1: $80 million / (1 + 0.09)^1 = $73.39 million
Year 2: $60 million / (1 + 0.09)^2 = $51.37 million
Year 3: $80 million / (1 + 0.09)^3 = $60.85 million
Year 4: $95 million / (1 + 0.09)^4 = $68.40 million
Now, we calculate the cumulative discounted cash flows:
Year 0: $(180 million)
Year 1: $(180 million) + $73.39 million = $(106.61 million)
Year 2: $(106.61 million) + $51.37 million = $(55.24 million)
Year 3: $(55.24 million) + $60.85 million = $5.61 million
The discounted payback period is the time it takes for the cumulative discounted cash flows to reach zero or become positive. In this case, the discounted payback period is between Year 3 and Year 4.
To determine the exact discounted payback period, we need to interpolate between Year 3 and Year 4. We can calculate the exact discounted payback period as follows:
Discounted payback period = Year 3 + (Positive cash flow in Year 4 / Cash flow difference between Year 4 and Year 3)
Discounted payback period = Year 3 + ($68.40 million / ($68.40 million - $60.85 million))
Discounted payback period ≈ Year 3 + ($68.40 million / $7.55 million)
Discounted payback period ≈ Year 3 + 9.05
Therefore, the discounted payback period for the project is approximately 3 years and 9.05 months.
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The discounted payback period for the project is 3 years and some fraction of the fourth year.
To calculate the discounted payback period, we need to determine the present value of each cash flow and accumulate them until the present value exceeds the initial investment.
Using a discount rate of 9%, we can calculate the present value (PV) of each cash flow as follows:
PV(Cash Flow) = Cash Flow / (1 + Discount Rate)^Year
Year 0: PV(180) = -180 / (1 + 0.09)^0 = -180
Year 1: PV(80) = 80 / (1 + 0.09)^1 = 73.39
Year 2: PV(60) = 60 / (1 + 0.09)^2 = 49.07
Year 3: PV(80) = 80 / (1 + 0.09)^3 = 57.60
Year 4: PV(95) = 95 / (1 + 0.09)^4 = 67.10
We accumulate the present values until the sum exceeds the initial investment:
Accumulated PV = -180 + 73.39 + 49.07 + 57.60 + 67.10 = 47.16
The discounted payback period is the time it takes for the accumulated present value to become positive. In this case, the discounted payback period is between Year 3 and Year 4.
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Estimating Bad Debts Expense and Reporting of Receivables At December 31, 2013. Sunil Company had a balance of $75,000 in its accounts receivable and an unused balance of $840 in its allowance for uncollectible accounts. The company then aged its accounts as follows: Current $60,800 0-60 days past due 8,800 61-180 days past due 3,600 Over 180 days past due 1,800 Total accounts receivable $75,000 The company has experienced losses as follows: 1% of current balances, 5% of balances 0-60 days past due, 15% of balances 61-180 days past due, and 40% of balances over 180 days past due. The company continues to base its provision for credit losses on this aging analysis and percentages. a. What amount of bad debts expense does Sunil report on its 2013 income statement? $ 2308 b. Show how accounts receivable and the allowance for uncollectible accounts are reported in its December 31, 2013, balance sheet. Current Assets: Accounts receivable Less: Allowance for uncollectible accounts Accounts receivable, net 75000 -2308 72692 C. Set up T-accounts for both Bad Debts Expense and for the Allowance for Uncollectible Accounts. Enter any unadjusted balances along with the dollar effects of the information described (including your results from parts a and b). Bad Debts Expense (E) Allowance for Uncollectible Accts. (XA) Balance Balance a a. Balance Balance Check
The provision for credit losses was entered directly as a debit, resulting in an ending balance of $2,308.
Bad Debts Expense (E) Allowance for Uncollectible Accts. (XA)
Beginning balance: $840
Beginning balance: $0
Current balances: 60800 Provision for credit losses: 600
0-60 days past due: 8800 Provision for credit losses: 440
61-180 days past due: 3600 Provision for credit losses: 540
Over 180 days past due: 1800 Provision for credit losses: 720
Total: 75000
Ending balance:
Bad Debts Expense: $2,308
Allowance for uncollectible accounts: $3,100
The $2,308 represents the amount of bad debts expense that Sunil Company reports on its 2013 income statement. The allowance for uncollectible accounts is reported in the balance sheet as a deduction from accounts receivable to arrive at the net realizable value of accounts receivable, which is $72,692 ($75,000 - $2,308).
In the T-accounts, the beginning balance for the allowance for uncollectible accounts was $840. The provision for credit losses was calculated based on the aging analysis and percentages provided, resulting in a total provision of $2,300. This amount was added to the beginning balance to arrive at an ending balance of $3,100.
The Bad Debts Expense T-account did not have any beginning balance, as no unadjusted balance was provided. The provision for credit losses was entered directly as a debit, resulting in an ending balance of $2,308.
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A business owner earned $4,225 for services he provided to a client, and received $2,000 in cash and the balance was put on account. Among the accounts effected, select the correct answer below. a. Cash was credited by $2,000; Accounts receivable was debited by $4,225 O b. Revenue was debited by $4,225; Accounts receivable was credited by $2,225 O c. Revenue was credited by $4,225; Cash was debited by $2,000 O d. Cash was debited by $4,225; Revenue was credited by $4,225The account removed from current assets to calculate the quick ratio is: O a. prepaid expenses b. inventory c. accounts receivable O d. cash O e. intangible assets A company buys a capital asset for $60,000 on January 1, and the company's year end is December 31. The company estimated that the asset would last ten years. The company also estimated that the asset could be sold for $5,000 at the end of the 10 year period. Based on the straight-line depreciation method, what would the annual depreciation be? O a. $6,500 O b. $6,000 O c. $7,000 O d. $5,500 During the last year, the inventory turnover has gone from 5 times to 7 times. Which of the following statements is TRUE? O a. the inventory turnover improved because operating expenses went up faster than inventory O b. the inventory turnover improved because cost of sales increased faster than inventory O c. the inventory turnover became worse because inventory increased faster than cost of sales d. the inventory turnover became worse because interest charges went up faster than inventory O e. the inventory turnover improved because cost of inventory increased faster than the gross profit A Moving to another question will save this response. Job WR53 at NW Fab, Inc. required $600 of direct materials and 30 direct labour hours at $22 per hour. Overhead allocation rate is based on direct labour hours. Estimated total overhead for the year was $650,000 and estimated direct labour hours were 25,000. What would be recorded as the cost of job WR53? O a. $2,160. O b. none of the above. O c. $2,040 O d. $1,260. Save Answer
Among the accounts affected, the correct answer is option that Revenue was credited by $4,225; Cash was debited by $2,000. This entry shows that $2,000 was received in cash and the remaining balance of $2,225 was put into the client's account as accounts receivable.
The account removed from current assets to calculate the quick ratio is accounts receivable. The quick ratio, also called the acid-test ratio, is used to measure a company's liquidity. It helps in determining whether the company can pay off its short-term debts quickly. Quick ratio = (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities
Annual depreciation based on the straight-line depreciation method would be $5,500. This is calculated as follows:Cost of the asset - Estimated salvage value / Estimated useful life= $60,000 - $5,000 / 10 years= $5,500Inventory turnover has improved as it has increased from 5 times to 7 times. This means that inventory is being sold more frequently and the company is selling its inventory at a faster rate.
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A painting from an Italian art gallery bought by a Canadian citizen a month ago, is considered when computing the current Canadian ________. An investment in some new machines, made by Roots, a publicly held Canadian brand, is taken into account when computing the current Canadian ________ but not the ________ Select one: a. CPI, GDP deflator, CPI b. GDP deflator, CPI, CPI c. CPI, CPI, GDP deflator d. GDP deflator, CPI, GDP deflator
The correct answer is option d. According to the given information, a painting from an Italian art gallery bought by a Canadian citizen a month ago is considered when computing the current Canadian GDP deflator. The GDP deflator measures the overall price level of goods and services produced within a country, and it includes both domestically produced and imported goods.
On the other hand, an investment in new machines made by Roots, a publicly held Canadian brand, is taken into account when computing the current Canadian CPI (Consumer Price Index). The CPI measures changes in the price level of a basket of goods and services consumed by households, and it reflects the average price changes experienced by Canadian consumers.
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The correct answer is option d. According to the given information, a painting from an Italian art gallery bought by a Canadian citizen a month ago is considered when computing the current Canadian GDP deflator.
The GDP deflator measures the overall price level of goods and services produced within a country, and it includes both domestically produced and imported goods. On the other hand, an investment in new machines made by Roots, a publicly held Canadian brand, is taken into account when computing the current Canadian CPI (Consumer Price Index). The CPI measures changes in the price level of a basket of goods and services consumed by households, and it reflects the average price changes experienced by Canadian consumers.
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Use the 3-equation model diagrams to show how the economy can fall into a deflation trap. Explain, with reference to the diagram, how the central bank/government can intervene to escape the trap. Show the relevant IS curve and re-label the MR as the PR to indicate that fiscal policy is being used. Are there any reasons why these policies might not work?
The economy can fall into a deflation trap when there is a persistent decline in prices, leading to reduced consumer spending, lower investment, and economic stagnation.
In the three-equation model diagram, we have the IS (Investment and Saving), LM (Liquidity Preference and Money Supply), and Phillips Curve (Inflation and Unemployment) curves. To illustrate a deflation trap, we focus on the IS-LM framework.
When the economy experiences deflation, the aggregate demand falls, causing a leftward shift of the IS curve. This shift results in lower output (Y) and higher unemployment (U). In response, the central bank can lower interest rates to stimulate investment and shift the LM curve downwards.
To escape the deflation trap, the government can implement fiscal policy by increasing government spending or reducing taxes. This action shifts the IS curve to the right, boosting output and employment. To reflect the use of fiscal policy, we relabel the Money Rate (MR) as the Price Rate (PR) on the diagram.
However, there are reasons why these policies might not work. First, the zero lower bound on interest rates can limit the central bank's ability to further lower rates, reducing the effectiveness of monetary policy. Second, if expectations of deflation become entrenched, individuals and businesses may delay spending, leading to a persistent deflationary spiral.
Moreover, fiscal policy might face constraints such as high government debt, which limits the government's ability to increase spending or reduce taxes. Additionally, if the private sector lacks confidence in the effectiveness of government measures, they may save more instead of increasing consumption or investment.
In summary, a deflation trap can be visualized in the IS-LM model. The central bank can intervene by lowering interest rates, while the government can use fiscal policy to stimulate the economy. However, limitations like the zero lower bound, expectations, and fiscal constraints can impede the effectiveness of these policies.\
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A country's gross domestic product (GDP) is $48 billion and its money supply (MS) is $12 billion.
(a) What is the country's velocity of money (VM)?
VM _____
(b). If the MS stays at the same level next year while the velocity of money "turns over" 8.0 times, what would be the level of GDP? (Enter in billion. Round answer to 2 decimal places, e.g. 527.52.)
GDP ______ billion
(a) The velocity of money (VM) in the given scenario is 4.00.
(b) The GDP, if the velocity of money turns over 8.0 times while the MS (money supply) remains constant at $12 billion, would be $96 billion.
In the first step, we calculate the velocity of money (VM) by dividing the GDP by the money supply. VM = GDP / MS. Substituting the given values, VM = $48 billion / $12 billion = 4.00.
In the second step, we can use the equation of quantity theory of money, which states that MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real GDP. Since we know that M = $12 billion and V = 8.0 (given in the question), we can rearrange the equation to solve for Q (real GDP). Q = (M * V) / P. Plugging in the known values, Q = ($12 billion * 8.0) / P.
In the third step, we can substitute the calculated value of Q and solve for P (price level) to find the GDP. Rearranging the equation, we have P = ($12 billion * 8.0) / Q. Plugging in the given GDP of $48 billion, we can solve for P. P = ($12 billion * 8.0) / $48 billion = $2 billion.
Finally, we can use the equation of GDP (GDP = P * Q) to calculate the new GDP when the velocity of money turns over 8.0 times while the money supply remains constant. Plugging in the calculated values of P and Q, GDP = $2 billion * $48 billion = $96 billion.
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A company had net sales of $30,400 and ending accounts receivable of $3,800 for the current period. Its days' sales uncollected equals: (Use 365 days a year.) Multiple Choice O 37.63 days. 60.93 days. 45.63 days. 56.83 days. 8.00 days.
The answer is 45.63 days.
Days' Sales Uncollected is the average amount of time it takes for a business to collect accounts receivable (AR) after a sale. It's sometimes called the "collection period," and it can reveal a lot about a company's efficiency. When compared to the credit terms extended to customers, the days' sales uncollected provides an indication of how efficiently a company is collecting on its receivables.
The calculation of Days' Sales Uncollected is as follows:Accounts Receivable / (Annual Credit Sales / 365 Days)The solution for the given problem is as follows:Annual Credit Sales = Net SalesEnding AR = $3,800Days' Sales Uncollected = Ending AR / (Net Sales / 365)Days' Sales Uncollected = $3,800 / ($30,400 / 365)Days' Sales Uncollected = $3,800 / 83.287 Days' Sales Uncollected = 45.63 DaysTherefore, the answer is 45.63 days.
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Work packages include which of the following types of information? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) [2] Resources needed to complete the work package Single person responsible for accomplishment of the work package The initiation date of the work package [2]The initiation date of the project References Worksheet Difficulty: 1 Easy R4-4b (Static) Learning Objective: Work packages include which of the... 04-04 Demonstrate the importance of a work breakdown structure (WBS) to the management of projects and how it serves as a database for planning and control.
Work packages include information about required resources, responsible individuals, and initiation dates for both the work package and the project.
Work packages include the following types of information:
Resources needed to complete the work package: Work packages define specific tasks or deliverables within a project. They include a list of resources required to complete the work, such as personnel, equipment, materials, and any other necessary resources.
Single person responsible for the accomplishment of the work package: Each work package has a designated person or a responsible individual who is accountable for its completion. This person is typically assigned the authority and responsibility to manage and execute the tasks within the work package.
The initiation date of the work package: Work packages have a defined start date, which marks the initiation of the work. This allows for proper planning, scheduling, and tracking of the work package activities.
The initiation date of the project: While the initiation date of the project itself is not directly part of the work package information, it provides important context and a reference point for the work package. The project initiation date helps determine the timeline and sequencing of the work packages within the overall project schedule.
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A company's sales to net worth ratio increases to the point that it is considered an overtrader. Assuming the company lacks sufficient cash to finance the increase in working capital accounts, its debt to equity ratio will?
a. Increase
b. Decrease
c. No Change
A company's debt to equity ratio is likely to rise if its sales to net worth ratio rises to the point where it is seen to be overtrading and it does not have enough cash on hand to support the rise in working capital accounts.
When a firm's sales to net worth ratio significantly rises, it often means that the company is producing more revenue in relation to its equity or net worth. Aggressive expansion, greater borrowing, or excessive risk-taking may be to blame for this. But if the business doesn't have enough cash on hand to pay for the equal rise in working capital accounts (such inventory, accounts receivable, etc.), it might have to turn to borrowing more money to make up the difference.
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