The fraction of the payment made at the end of the second year that represents repayment of principal is 0.3435 (approximately).
1. Calculate the annual interest payment:
Annual interest payment = Loan amount * Interest rate
= $1,000,000 * 15%
= $150,000
2. Calculate the annual principal repayment:
Annual principal repayment = Total payment - Annual interest payment
To find the total payment, we can use the formula for the present value of an annuity:
PV = PMT * [(1 - (1 + [tex]r)^{(-n)[/tex]) / r]
Where:
PV = Present value (loan amount)
PMT = Payment amount
r = Interest rate per period
n = Total number of periods
Rearranging the formula to solve for PMT, we get:
PMT = PV * [r / (1 - (1 + [tex]r)^{(-n)[/tex])]
Plugging in the given values:
PV = $1,000,000
r = 15% (or 0.15)
n = 5 (5-year loan)
PMT = $1,000,000 * [0.15 / (1 - (1 + 0.[tex]15)^{(-5)[/tex])]
= $1,000,000 * [0.15 / (1 - 0.440982)]
≈ $1,000,000 * 0.15 / 0.559018
≈ $268,309.61 (approximately)
Annual principal repayment = $268,309.61 - $150,000
= $118,309.61
3. Calculate the principal repayment at the end of the second year:
Principal repayment at the end of the second year = Annual principal repayment * 2
= $118,309.61 * 2
= $236,619.22
4. Calculate the fraction of the payment representing repayment of principal:
Fraction = Principal repayment at the end of the second year / Total payment at the end of the second year
Total payment at the end of the second year = PMT * 2
= $268,309.61 * 2
= $536,619.22
Fraction = $236,619.22 / $536,619.22
≈ 0.4400 (approximately)
Therefore, the fraction of the payment made at the end of the second year that represents repayment of principal is 0.3435 (approximately).
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Question 6 The following information pertains to the January operating budget for Casey Corporation. Budgeted sales for January $205,000 and February $110,000. Collections for sales are 60% in the month of sale and 40% the next month. Gross margin is 35% of sales. Administrative costs are $14,000 each month. . . * Beginning accounts receivable is $30,000. Beginning inventory is $14,000. Beginning accounts payable is $73,000. (All from inventory purchases) Purchases are paid in full the following month. Desired ending inventory is 30% of next month's cost of goods sold (COGS). At the end of January, budgeted accounts receivable is O $82,000 O $159,000 O $44,000 O $123,000 h Question 8 The following information pertains to the January operating budget for Casey Corporation. Budgeted sales for January $207,000 and February $105,000 Collections for sales are 60% in the month of sale and 40% the next month. Gross margin is 25% of sales Administrative costs are $19,000 each month. . Beginning accounts receivable is $30,000 Beginning inventory is $16,000. Beginning accounts payable is $71,000. (All from inventory purchases.) Purchases are paid in full the following month. Desired ending inventory is 30% of next month's cost of goods sold (COGS). For January, budgeted cash collections are O $154,200 O $124,200 $207,000 O $30,000 Question 9 The following information pertains to the January operating budget for Casey Corporation. Budgeted sales for January $210,000 and February $105,000. Collections for sales are 60% in the month of sale and 40% the next month. Gross margin is 35% of sales. Administrative costs are $15,000 each month. Beginning accounts receivable is $29,000. Beginning inventory is $21,000. Beginning accounts payable is $75,000. (All from inventory purchases.) + + Purchases are paid in full the following month. Desired ending inventory is 25% of next month's cost of goods sold (COGS). For January, budgeted net income is O $69,000 O $111,000 $73,500 O $58,500
The budgeted accounts receivable at the end of January for Casey Corporation is $82,000. The budgeted cash collections for January are $124,200, and the budgeted net income for January is $58,500.
In Question 6, the budgeted accounts receivable at the end of January for Casey Corporation can be calculated as follows:
Budgeted sales for January: $205,000
Collections for sales in the month of sale (60%): $205,000 * 60% = $123,000
Collections for sales in the next month (40%): $110,000 * 40% = $44,000
Beginning accounts receivable: $30,000
To calculate the budgeted accounts receivable at the end of January, we add the collections for sales in the month of sale and subtract the collections for sales in the next month, taking into account the beginning accounts receivable:
Budgeted accounts receivable at the end of January = Beginning accounts receivable + Collections for sales in the month of sale - Collections for sales in the next month
= $30,000 + $123,000 - $44,000
= $82,000
Therefore, the budgeted accounts receivable at the end of January for Casey Corporation is $82,000.
In Question 8, the budgeted cash collections for January can be calculated as follows:
Budgeted sales for January: $207,000
Collections for sales in the month of sale (60%): $207,000 * 60% = $124,200
Therefore, the budgeted cash collections for January for Casey Corporation is $124,200.
In Question 9, the budgeted net income for January can be calculated as follows:
Budgeted sales for January: $210,000
Gross margin (35%): $210,000 * 35% = $73,500
Administrative costs: $15,000
To calculate the budgeted net income, we subtract the administrative costs from the gross margin:
Budgeted net income for January = Gross margin - Administrative costs
= $73,500 - $15,000
= $58,500
Therefore, the budgeted net income for January for Casey Corporation is $58,500.
Overall, based on the given information, the budgeted accounts receivable at the end of January is $82,000, the budgeted cash collections for January are $124,200, and the budgeted net income for January is $58,500 for Casey Corporation.
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a) Based on the given information, the best location for the Warriors to relocate to is Jackson, with a total weighted score of 61.00 (Enter your response rounded to two decimal places.) b) Jackson just raised its incentive package, and the new score is 85. Why doesn't this impact your decision in part (a)? A. Because Jackson is already the better site. B. Even if the score is 85, Jackson's total weighted score drops to 57, just ahead of Mobile. C. Even if the score is 85, Jackson will stay as the second choice. Ken Gilbert owns the Knoxville Warriors, a minor league baseball team in Tennessee. He wishes to move the Warriors south, to either Mobile (Alabama) or Jackson (Mississippi). The table below gives the factors that Ken thinks are important, their weights, and the scores for Mobile and Jackson. Factor Incentive Player satisfaction Sports interest Size of city Weight 0.45 0.30 0.20 0.05 Mobile 1248 75 20 45 65 Jackson 55 55 90 35
a) Based on the given information, the best location for the Warriors to relocate to is Jackson, with a total weighted score of 61.00. b) The increase in Jackson's incentive package to a score of 85 does not impact the decision in part (a) because even with the higher score, Jackson's total weighted score drops to 57, just ahead of Mobile.
The correct answer is C.
In the given scenario, Ken Gilbert, the owner of the Knoxville Warriors, is considering relocating the team to either Mobile or Jackson. Factors such as incentive package, player satisfaction, sports interest, and size of the city are taken into account to evaluate the suitability of each location.
After assigning weights to these factors, a score is calculated for both Mobile and Jackson. Based on the given scores, Jackson initially has a total weighted score of 61.00, while Mobile has a score of 57.00. This indicates that Jackson is the preferred choice for relocation according to the initial evaluation.
However, it is mentioned that Jackson raised its incentive package, resulting in a new score of 85. Despite this increase, the total weighted score for Jackson drops to 57.00, which is just ahead of Mobile's score. This means that even with the higher incentive score, Jackson remains as the second choice for relocation.
Hence , C is the correct option
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On Jan. 2020, Adams Inc. leased two automobiles from Sub Autos Corp. The lease requires Adams Inc. to make 8 annual payments of $12.5 at the beginning of each year. The lease does not have any prepayments, lease incentives, or initial direct costs. The present value of the payments is $80 and the present value of the residual value is $14. Adams Inc has agreed to guarantee the residual value of the cars. Sub Autos Corp. valued these cars at $88 in its inventory. It has recently sold similar cars for $92 each.
Record the journal entry for Sub Auto's initial measurement of the lease on Jan. 1, 2020. Select all that apply.
a. Cr. Sales Revenues $80
b. Cr. Sales Revenues $100
c. Dr. Net Investment in the Lease-Sales Type $80
d. Dr. Net Investment in the Lease-Sales Type $94
e. Dr. Lease receivable $80
f. Cr. Inventory $88
g. Dr. Cost of Goods Sold $74
h. Dr. Cost of Goods Sold $88
Adams Inc. has agreed to make eight annual payments of $12.5 each at the beginning of each year. The lease requires a present value of $80 and a present value of $14 as residual value. Sub Autos Corp has guaranteed the residual value of the cars and has recently sold similar cars for $92 each.
Sub Auto's initial measurement of the lease on Jan. 1, 2020, journal entry are as follows:
Dr. Net Investment in the Lease-Sales Type $80Cr. Sales Revenues $80
Present value of lease payments = $80Present value of residual value = $14
The cost of goods sold is = $88 - $14 = $74.
Hence, option g and h are eliminated.
There are no lease incentives or initial direct costs.
Hence option a and b are eliminated.
As per the journal entry for the initial measurement of the lease, the first entry is to recognize the leased asset as well as the lease liability that is equal to the present value of the lease payments.
Subsequently, the sales revenue is recognized in the same amount as the present value of the lease payments. Therefore, the correct answer is as follows:
Dr. Net Investment in the Lease-Sales Type $80Cr. Sales Revenues $80
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3 A farmer has 400 bushels of wheat, and he can convert wheat this year (x1) into wheat next year (x2) using the farming technology x2=50x1. All prices are expected to remain constant between this year and next. Clearly, if the farmer plants his entire endowment he will earn a rate of return of 150 per cent on his investment. 66 Investment decisions under certainty i Illustrate the farmer's consumption opportunities in a commodity space {x1,x2} diagram when he cannot access a capital market (i.e. he cannot borrow or lend). Write down his optimization problem when he derives utility from consuming wheat now and next year, and then derive the condition for optimally chosen investment. Illustrate this outcome in your diagram. ii Suppose the farmer can borrow and lend at 25 per cent per annum. How much wheat should he plant? What are his consumption opportunities now? Why is his investment decision now independent of his tastes? iii The farmer tells his neighbour that if the market interest rate were to rise to 50 per cent per annum he would plant only 278 bushels of wheat even though he could earn a 150 per cent return on his investment by planting the whole 400 bushels. Is the farmer investing too little wheat? iv How much wheat should the farmer plant when he can borrow and lend at a zero market rate of interest? v With the interest rate at which he can borrow and lend standing at 25 per cent, the farmer learns that he can borrow the equivalent of 300 bushels of wheat at a zero interest rate from a primary industry bank recently established by the government to stimulate farm investment. What is his optimal response to this scheme? What are his consumption opportunities?
i) If the farmer plants his entire endowment, he will earn a rate of return of 150% on his investment. When he cannot access a capital market, the farmer's consumption opportunities in a commodity space {x1, x2} . The optimization problem when he derives utility from consuming wheat now and next year is as follows:-
Max U= u (x1, x2) subject to 50x1≤x2 where u is the farmer's utility function. If we substitute x2 in the optimization equation, the condition for optimally chosen investment will be as follows:-
Max U= u (x1, 50x1)The First Order Condition of this optimization problem is given by:MU1= 50 MU2which yields u'1/u'2= 50 or u'1= 50u'2. This represents the slope of the farmer's indifference curve, which indicates his trade-off between x1 and x2.
ii) In this situation, the farmer should plant only 278 bushels of wheat. When the farmer can borrow and lend at 25%, his consumption opportunities are illustrated in the commodity space.
iii) The farmer is investing too little wheat, despite the fact that he could earn a 150% return on his investment by planting the whole 400 bushels. The farmer is anticipating an interest rate of 50% per annum, which is higher than his return on investment, and he is therefore unwilling to invest all of his endowment.
iv) The amount of wheat the farmer should plant when he can borrow and lend at a zero market rate of interest is determined by his optimal investment decision. When the interest rate is zero, the farmer's consumption opportunities are shown in the commodity space.
v) The farmer's optimal response to this scheme will be to borrow 300 bushels of wheat at a zero interest rate and plant 322 bushels of wheat. His consumption opportunities are illustrated in the commodity space.
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When and where is an acceptance effective and accomplished? 6
marks
In the case of post-box rule:
In the case of unilateral contract:
In the case of e-mail or fax:
In general, the effectiveness and accomplishment of an acceptance depend on the specific circumstances and the method of communication used. Here are the answers to each scenario you provided:
1. In the case of the post-box rule:
According to the post-box rule, an acceptance sent by mail is effective and accomplished as soon as it is properly posted. This means that once the acceptance is placed in the mailbox and properly addressed, it is considered effective, even if it hasn't been received by the offeror yet. The acceptance takes effect at the moment of posting.
2. In the case of a unilateral contract:
A unilateral contract is a contract where acceptance is made by performance rather than by a direct communication of acceptance. In such cases, the acceptance is effective and accomplished when the offeree performs the requested act or condition specified in the offer. Once the offeree performs the required action, acceptance is considered effective and the contract is formed.
3. In the case of email or fax:
For email or fax communications, the effectiveness and accomplishment of acceptance depend on the terms of the offer and any specific agreements between the parties. In general, acceptance through email or fax is effective and accomplished when it is received by the offeror and brought to their attention. The acceptance takes effect at the moment it is received and brought to the offeror's attention, as long as the acceptance is in a form and format that the offeror has authorized or accepted.
It's important to note that contract laws and regulations may vary between jurisdictions, so it's always advisable to consult specific legal guidelines and seek professional advice when dealing with acceptance in different scenarios.
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Think about a good/product that is available in your local grocery store. Describe one example each of an event that would 1) increase demand for that good; 2) decrease demand; 3) increase supply; and 4) decrease supply. Please be creative and think about factors not just for the grocery store and consumer, but also for producers and distributors, other goods, and non-consumers.
1) A widely reported health research demonstrating the product's beneficial impact on general wellbeing could result in an increase in demand for a specific food in a neighbourhood grocery store. As individuals become increasingly concerned about their health and look for products that offer specific benefits, this can lead to a spike in consumer interest.
2) If a rival releases a brand-new, cutting-edge product with improved features or a lower price point, demand for the same good may decline. This can deter customers from buying the original product, decreasing demand. The discovery of a production method or technological advancement that is more effective is a circumstance that might boost the supply of the good. This might allow producers to raise their As a result, there is a greater supply of the goods in the grocery shop. 4) In contrast, a decline in supply could be brought on by a natural disaster or unfavourable weather conditions that have an impact on the production or delivery of the good. For instance, a drought in the area where the product's essential ingredients are cultivated may cause a deficiency and lower supply in the supermarket.
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Corruption is a big agenda in Kenya that has led to backward development. Citing some 2 scandals that occurred in the recent past explain how it derailed development in Kenya
Corruption in Kenya has hindered development through various scandals. Two recent examples are the National Youth Service (NYS) scandal and the Kenya Power corruption scandal. These scandals involved embezzlement of public funds, leading to financial losses, misallocation of resources, and a lack of public services and infrastructure development.
The National Youth Service (NYS) scandal, which occurred in 2015 and 2018, involved the misappropriation of approximately $100 million from funds allocated for youth empowerment programs. The corruption scheme involved fraudulent payments for goods and services that were never delivered. As a result, funds intended for the development and empowerment of the youth were siphoned off, leading to a loss of opportunities for skill development, education, and employment.
The Kenya Power corruption scandal, which came to light in 2018, involved inflated contracts and irregular payments within the electricity sector. It was discovered that Kenya Power officials colluded with private companies to inflate prices for goods and services, leading to massive financial losses for the state-owned power utility. These losses limited the capacity of Kenya Power to invest in infrastructure development, expand electricity access, and improve the reliability of the power supply, thus hindering economic growth and development.
In both cases, corruption undermined the efficient allocation of resources, diverted funds away from public services, and eroded public trust. This hindered the development of critical sectors such as youth empowerment and energy infrastructure, perpetuating a cycle of backward development in Kenya.
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Q1. A) With the aid of appropriate diagrams discuss the effects of changes in supply on a demand curve and explain the major factors that bring about such a change in the market. Using this diagram justify for the reason why we purchase goods at lower prices during the harvesting period of farm products. B) As the financial controller of a large manufacturing firm, briefly explain the investment decision process to your new Managing Director
A systematic investment decision process, the financial controller helps the company make informed investment choices that align with its financial goals and maximize shareholder value.
A) When there is a change in supply in a market, it can have significant effects on the demand curve. Let's consider the market for farm products as an example.
1. Effects of Changes in Supply on the Demand Curve:
- Increase in Supply: If the supply of farm products increases, represented by a rightward shift of the supply curve, it results in a new equilibrium point. As a result, the market price decreases, and the quantity demanded increases. This is illustrated by a movement along the demand curve to a higher quantity demanded at a lower price.
- Decrease in Supply: Conversely, if the supply of farm products decreases, represented by a leftward shift of the supply curve, it leads to a new equilibrium point with a higher market price and a lower quantity demanded. This is shown by a movement along the demand curve to a lower quantity demanded at a higher price.
2. Factors Affecting Supply Changes in the Market:
- Input Costs: Changes in the costs of inputs, such as labor, fertilizers, or machinery, can impact the supply of farm products. For example, if input costs increase, it may reduce the profitability of farming, leading to a decrease in supply.
- Technological Advancements: Improvements in agricultural technology, such as new farming techniques or genetically modified crops, can increase productivity and thus impact the supply of farm products.
- Weather Conditions: Weather plays a crucial role in agricultural production. Natural disasters, droughts, or other adverse weather events can negatively affect crop yields, leading to a decrease in supply.
During the harvesting period of farm products, we often observe lower prices for goods due to an increase in supply. This can be explained by the temporary surge in production during this period. Farmers typically harvest and bring their products to the market simultaneously, resulting in a higher quantity supplied. As a result, the market supply curve shifts to the right, leading to lower prices. Consumers can take advantage of this situation by purchasing goods at lower prices during the harvesting period.
B) As the financial controller of a large manufacturing firm, the investment decision process involves several key steps:
1. Identify Investment Opportunities: The first step is to identify potential investment opportunities that align with the company's strategic objectives. This could involve expanding existing operations, acquiring new assets, or investing in research and development.
2. Evaluate Investment Proposals: Once investment opportunities are identified, the financial controller, along with the management team, evaluates the investment proposals. This involves analyzing the expected cash flows, assessing the risks involved, and considering the potential returns on investment.
3. Capital Budgeting: The financial controller helps in the capital budgeting process, which involves estimating the initial investment required, considering the expected cash inflows and outflows over the project's life, and calculating the net present value (NPV), internal rate of return (IRR), and other financial metrics to assess the project's viability.
4. Risk Assessment: Evaluating the risks associated with the investment is crucial. The financial controller assesses factors such as market conditions, competition, regulatory changes, and financial risks to ensure the investment aligns with the company's risk tolerance and overall financial stability.
5. Financing Decisions: Once an investment proposal is deemed viable, the financial controller determines the optimal financing mix. This may involve considering internal funds, external debt, equity financing, or a combination thereof.
6. Monitoring and Performance Evaluation: After the investment is made, the financial controller monitors the performance of the investment, compares actual results against projected figures, and conducts regular financial analysis to ensure the investment is generating the expected returns.
By following a systematic investment decision process, the financial controller helps the company make informed investment choices that align with its financial goals and maximize shareholder value.
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Accounting for Notes leivable On November 30, Tucker Products performed computer programming services for Thomas Inc. in endange for at $39,900, 12% not receivable. Thomas paid fickor the full amount of interest and principal on April 30 Required: hepare the necessary entries for Tucker to record the transactions described above assuming a December 31 year and. If an amount bes dies not require an entry, leave it bank Round your final answer to the nearest dollar Nov. 30 88 (Record suance of the eats) Dec. 31 Apr 30 (Recard collection of note recavable)
Tucker Products records the issuance of the note receivable on November 30, and the collection of the note receivable (principal and interest) on April 30. No entry is required on December 31.
The necessary entries for Tucker Products to record the transactions described above, assuming a December 31 year-end, are as follows:
Nov. 30:
Debit: Notes Receivable - Thomas Inc. $39,900
Credit: Service Revenue $39,900
(To record the issuance of the note receivable)
Dec. 31:
No entry required.
Apr. 30:
Debit: Cash $39,900
Debit: Notes Receivable - Thomas Inc. (Principal) $39,900
Credit: Interest Revenue $1,396
Credit: Notes Receivable - Thomas Inc. (Interest) $38,504
(To record the collection of the note receivable, including principal and interest)
On November 30, Tucker Products performed computer programming services for Thomas Inc. and received a note receivable for $39,900. This transaction represents revenue earned by Tucker for its services. The journal entry records the increase in Notes Receivable and the corresponding increase in Service Revenue.
On December 31, there is no entry required because it is the end of the accounting period and no additional transactions related to the note receivable occurred.
On April 30, Thomas Inc. paid Tucker the full amount of the note receivable, including principal and interest. The principal amount of $39,900 is debited to the Notes Receivable - Thomas Inc. account, and the corresponding credit is made to Cash, representing the collection of the principal. The interest revenue of $1,396 (12% interest on the note for 5 months) is credited to recognize the interest income earned by Tucker. The remaining balance of $38,504 (principal minus interest) is debited to Notes Receivable - Thomas Inc., reducing the outstanding balance of the note receivable.
Tucker Products records the issuance of the note receivable on November 30, and the collection of the note receivable (principal and interest) on April 30. No entry is required on December 31.
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Essay Question: What kind of capacity problems do super markets periodically experience, list five problems and explain in detail? Also, what are some alternatives to deal with those problems?
Supermarkets periodically face a capacity problem. A capacity problem occurs when demand exceeds supply or when the available capacity is insufficient to meet the demand. This essay will explain five kinds of capacity problems that supermarkets usually experience and suggest alternatives to address them.
1. Inadequate capacity for parking and unloading of goods: During peak periods, supermarkets frequently experience capacity problems in their parking lots and unloading areas. As a result, delivery vehicles might queue up outside the store, blocking traffic and making it difficult for other vehicles to park. Alternative: Supermarkets can increase their unloading and parking capacity by expanding their existing facilities or developing additional ones. They could also coordinate with local authorities to offer customers parking spaces in nearby lots or car parks.
2. Queuing and crowding: Queuing and crowding are the most typical capacity issues in supermarkets. This problem occurs when the store's maximum occupancy is reached, and there isn't enough space to handle the flow of customers. This may result in long queues at checkout counters, blocking of aisles, and increased waiting times. Alternative: Supermarkets may decrease queue times and congestion by implementing self-checkout systems or enabling online purchases and home delivery.
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The ant division of Marvel Corporation, which has an income of 11,250$ and an invested capital of 75000$ is studying an investment opportunity that will cost 35000$ and yield a profit of 3,675$. Assuming the company uses an imputed interest rate of 11%, which of the following statements is true?
a. If the division is evaluated on the basis of ROI, the divisional manager would not accept the new investment because it is only good for the company, but bad for the division.
b. If the division is evaluated on the basis of Residual income, the divisional manager would accept the new investment because it is good for the division.
c. If the division is evaluated on the basis of Residual income, the division manager would not accept the new investment because it is only good for the company but bad for the division.
d. If the division is evaluated on the basis of ROI, the division manager product division would accept the new investment because it is good for the division.
e. Regardless of whether the division is evaluated on the basis of ROI or Residual income, the divisional manager will not accept the new investment because it is bad for the division and the company.
The correct statement is: If the division is evaluated based on ROI, the division manager would accept the new investment because it is beneficial for the division.
To determine the correct statement, let's calculate the ROI (Return on Investment) and Residual income:
ROI = (Income / Invested Capital) * 100
= (11,250 / 75,000) * 100
= 15%
Residual Income = Income - (Imputed Interest Rate * Invested Capital)
= 11,250 - (0.11 * 75,000)
= 2,250
Now, let's analyze the options based on these calculations:
a. If the division is evaluated on the basis of ROI, the divisional manager would not accept the new investment because it is only good for the company, but bad for the division.
This statement is not true because the ROI of the division (15%) is higher than the imputed interest rate (11%).b. If the division is evaluated on the basis of Residual income, the divisional manager would accept the new investment because it is good for the division.
This statement is not true because the residual income (2,250) does not consider the profit from the new investment (3,675$), which would increase the division's overall income.c. If the division is evaluated on the basis of Residual income, the division manager would not accept the new investment because it is only good for the company but bad for the division.
This statement is not true as it assumes that the new investment is bad for the division, but the increased profit from the investment would actually improve the division's residual income.d. If the division is evaluated on the basis of ROI, the division manager would accept the new investment because it is good for the division.
This statement is true as the ROI of the division (15%) is higher than the imputed interest rate (11%).e. Regardless of whether the division is evaluated on the basis of ROI or Residual income, the divisional manager will not accept the new investment because it is bad for the division and the company.
This statement is not true as the calculations show that the new investment would increase the division's profitability.Therefore, the correct statement is:
d. If the division is evaluated on the basis of ROI, the division manager would accept the new investment because it is good for the division.
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Explain the short-run and long-run effects of an exogenous decrease in investment by using graphical analysis. (7 points)
A leftward shift in the aggregate demand (AD) curve can be used to illustrate an exogenous decline in investment. Both the short-run and long-run equilibrium of the economy are impacted by this decline in investment.
Other parts of aggregate demand, such as government spending, and consumption, may be crowded out as a result of the decline in investment. When investment declines, the need for loanable money also declines, which raises interest rates. Higher interest rates make it difficult for people and businesses to borrow money and spend it, which lowers consumption and investment.
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Adam has $79,000 in taxable income this year.
Tax Bracket Bottom of Bracket Top of Bracket Tax Liability for Bracket
8% $0 $11,600 $928
12% $11,600 $46,600 $4,200
15% $46,600 $116,600 $10,500
23% $116,600 $216,600 $23,000
31% $216,600 $416,600 $62,000
37% $416,600
Calculate their total tax liability for this year.
Option D is correct.
Adam has $79,000 in taxable income this year. The tax liability for different brackets is as follows:Tax BracketBottom of BracketTop of BracketTax Liability for Bracket
8%$0$11,600$92812%$11,600$46,600$4,20015%$46,600$116,600$10,50023%$116,600$216,600$23,00031%$216,600$416,600$62,00037%$416,600Therefore, Adam's total tax liability can be calculated as follows;
Since $79,000 is in the bracket of $46,600 to $116,600, it will be taxed at 15%.His tax liability for the first bracket is $46,600 − $11,600 = $35,000His tax liability for the second bracket is $79,000 − $46,600 = $32,400.Total tax liability is therefore, $35,000(0.08) + $32,400(0.15) = $5,800 + $4,860 = $10,660Adam's total tax liability for this year is $10,660. Therefore, option D is correct.
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What financial statement shows all the benefits earned and
sacrifices incurred during the accounting Period?
The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the Income Statement.
A financial statement is a document that summarizes an individual or business's financial position, including assets, liabilities, and net worth. It is used to assess the financial health of an individual or business.An income statement is one of the three major financial statements, along with the balance sheet and the cash flow statement, that report a company's financial performance over a specific accounting period.
The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular period.
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Jim purchases $10,000 par value bonds with a 10 percent coupon rate and a 7 percent yield to maturity. Jim will hold the bonds until maturity. Thus, he will earn a return of ___ percent.
Jim purchases $10,000 par value bonds with a 10 percent coupon rate and a 7 percent yield to maturity. Jim will hold the bonds until maturity. Thus, he will earn a return of 10 percent.
How do we calculate the rate of return on a bond investment?
The rate of return on a bond investment is determined by a combination of its coupon rate, yield to maturity (YTM), and the time remaining until maturity.
A bond's coupon rate is the interest rate paid to bondholders on the bond's face value.
The YTM of a bond is the interest rate that investors can expect to receive if they hold the bond until maturity. Bondholders will receive the full face value of the bond when it matures.
The formula to calculate the rate of return on a bond investment is:
Rate of return = (Annual interest income + Capital gain or loss) / Initial investment x 100, Where: Annual interest income = coupon rate x face value, Capital gain or loss = (face value - purchase price), Initial investment = purchase price of the bond
In this problem, Jim purchased $10,000 par value bonds with a 10 percent coupon rate and a 7 percent yield to maturity. He will hold the bonds until maturity. Thus, he will earn a return of 10 percent since the coupon rate is equal to the rate of return when the bond is held to maturity
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At May 1, 2020, Sheridan Company had beginning inventory consisting of 240 units with a unit cost of $5.40. During May, the company purchased inventory as follows: 740 units at $5.40 620 units at $7.00 The company sold 970 units during the month for $14 per unit. Sheridan uses the average cost method. The average cost per unit for May is $5.400. $5.900. $6.400. O $6.020.
The average cost per unit for May is $7.29.The correct option is the second option: $5.900
At May 1, 2020, Sheridan Company had beginning inventory consisting of 240 units with a unit cost of $5.40. During May, the company purchased inventory as follows: 740 units at $5.40 and 620 units at $7.00. The company sold 970 units during the month for $14 per unit. Sheridan uses the average cost method. Determine the average cost per unit for May.As per the average cost method, the inventory cost is calculated by taking an average cost of the inventory available. This method assigns the average cost of inventory to all units regardless of the purchase price.
The average cost per unit is calculated by dividing the total cost of goods available for sale by the total number of units available for sale.The total cost of goods available for sale = (Beginning inventory + Purchases)Total units available for sale = (Beginning inventory + Purchases - Units sold) = (240 + 740 + 620 - 970) = 630Average cost per unit for May = Total cost of goods available for sale/Total units available for sale = $(240 × 5.40 + 740 × 5.40 + 620 × 7.00)/630 = $4,590/630 = $7.29Therefore, the average cost per unit for May is $7.29.The correct option is the second option: $5.900.
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ABC common stock is expected to have extraordinary growth in earnings and dividends of 20% per year for 2 years, after which the growth rate will settle into a constant 6%. If the discount rate is 15% and the most recent dividend was $2.50, what should be the approximate current share price?
$31.16
$33.23
$37.39
$47.77
The approximate current share price should be $34.08.
To approximate the current share price of ABC common stock, we need to calculate the present value of the future dividends. The stock is expected to have extraordinary growth in earnings and dividends of 20% per year for 2 years, followed by a constant growth rate of 6%. The discount rate is 15% and the most recent dividend was $2.50. By discounting the future dividends and summing them up, we can determine the approximate current share price.
First, we calculate the present value of the extraordinary growth period using the dividend growth formula:
PV = D1 / (1 + r) + D2 / (1 + r)^2
PV = $2.50 / (1 + 0.15) + $2.50 * (1 + 0.20) / (1 + 0.15)^2
PV = $2.17 + $2.24 = $4.41
Next, we calculate the present value of the constant growth period using the Gordon growth model:
PV = D3 / (r - g)
PV = $2.50 * (1 + 0.06) / (0.15 - 0.06)
PV = $2.67 / 0.09 = $29.67
Finally, we sum up the present values:
Current Share Price = PV of extraordinary growth period + PV of constant growth period
Current Share Price = $4.41 + $29.67 = $34.08
Therefore, the approximate current share price should be $34.08.
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__________is a measure of the difference between numbers in a data collection
a. Standard deviation
b. Variance
C. CAPM
d. Total risk
e. All of the above
f. None of the above
When a security has a higher beta than the other securities, it means............
a. The higher the unavoidable risk
b. The higher the avoidable risk
c. The less unavoidable risk
d. Reduce the needless risk.
e. All of the above
f. None of the above
The answer to the first question is e. All of the above. Standard deviation, variance, CAPM (Capital Asset Pricing Model), and total risk are all measures of the difference between numbers in a data collection.
Standard deviation measures the dispersion or variability of the data points from the mean. Variance is the average of the squared deviations from the mean. CAPM is a financial model that estimates an asset's expected return based on its beta, which measures its sensitivity to market movements. Total risk encompasses both systematic (unavoidable) and unsystematic (avoidable) risk factors.
In the second question, the correct answer is a. The higher the unavoidable risk. Beta is a measure of systematic risk or market risk. It quantifies the sensitivity of a security's returns to the overall market movements. A higher beta indicates that the security is more responsive to market fluctuations, which implies a higher level of unavoidable risk. Avoidable risk, on the other hand, refers to idiosyncratic or company-specific risk that can be diversified away by holding a well-diversified portfolio. Therefore, a higher beta implies a higher exposure to market risk and a greater level of unavoidable risk for the security in comparison to other securities.
It's important to note that the concept of beta and its implications can vary depending on the context and the specific model or theory being used. The CAPM approach provides one interpretation of beta, but there may be alternative theories or models that offer different explanations of beta's meaning and effects on risk.
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Boler Company has sales revenue of $585,600. Cost of goods sold before adjustment is $336,000. The company's actual manufacturing overhead is $81,000, while alcated manufacturing overheed is $105,200 What is the actual gross profit? A $249.500 B $235,400 C. . $263.800 D $158,000
The actual gross profit can be calculated by the following formula: Actual gross profit = Sales - Cost of goods sold - Actual manufacturing overhead. So, we can calculate the actual gross profit of the Boler Company as follows: Actual gross profit = $585,600 - $336,000 - $81,000 Actual gross profit = $168,600
Cost of goods sold before adjustment is $336,000. The company's actual manufacturing overhead is $81,000, while allocated manufacturing overhead is $105,200. To calculate the actual gross profit, we need to know the value of the adjustment that needs to be made to the cost of goods sold. The adjustment value is equal to the difference between the actual manufacturing overhead and the allocated manufacturing overhead.
Adjustment value = Actual manufacturing overhead - Allocated manufacturing overhead
Adjustment value = $81,000 - $105,200
Adjustment value = -$24,200
This means that the company overallocated its manufacturing overhead by $24,200.The adjusted cost of goods sold can be calculated as follows:
Adjusted cost of goods sold = Cost of goods sold before adjustment - Adjustment value
Adjusted cost of goods sold = $336,000 - (-$24,200)
Adjusted cost of goods sold = $360,200
Now we can calculate the actual gross profit as follows:
Actual gross profit = Sales - Cost of goods sold - Actual manufacturing overhead
Actual gross profit = $585,600 - $360,200 - $81,000
Actual gross profit = $144,400
Therefore, the actual gross profit of the Boler Company is $144,400. Option A: $249,500 is incorrect. Option B: $235,400 is incorrect. Option C: $263,800 is incorrect. Option D: $158,000 is incorrect.
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B-C ratio method is the equivalent annual cost of the initial investment including the allowance for market value if any. True False
False.
The Benefit-Cost (B-C) ratio method compares the present value of the project's expected benefits to the present value of its expected costs. It does not involve the equivalent annual cost of the initial investment or include an allowance for market value. The B-C ratio is calculated by dividing the present value of benefits by the present value of costs.
The B-C ratio method helps evaluate the economic feasibility of a project by assessing whether the benefits outweigh the costs. If the B-C ratio is greater than 1, it indicates that the project's benefits exceed its costs and is considered economically viable.
Therefore, the statement that the B-C ratio method is the equivalent annual cost of the initial investment including the allowance for market value is false.
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Swanson Industries produces wooden chairs using a combination of labor and capital. The production function is given by f(K,L) = K²L where K is the amount of capital and L is the amount of labor input used. Suppose for simplicity that Swanson Industries can purchase any amount of labor at a wage of w = 5 and any amount of capital at a rate of r = 3. (a) Set up the cost minimization problem for Swanson Industries and solve for the optimal amount of capital and the optimal amount of labor, each as a function of q. (b) Using your answer to (a), solve for the (minimized) cost function C(q). (b) What kind of returns to scale does the firm exhibit?
Swanson Industries produces wooden chairs using labor and capital with the production function K²L. The cost minimization problem is solved to get the optimal capital and labor as functions of q. The cost function is found, and the production function exhibits constant returns to scale.
(a) The cost minimization problem for Swanson Industries is to minimize the cost of producing q units of output given the production function and the input prices. The cost function is:
C = wL + rK
C = 5L + 3K²L/q
∂C/∂K = 6KL/q = 0
∂C/∂L = 5 + 3K²/q = 0
6KL/q = 0 => L = 0 or K = q/6
From the second equation, we can substitute K = q/6 and solve for L:
5 + 3(q/6)²/q = 0 => q = 30L²/7
Substituting q = 30L²/7 into K = q/6, we get:
K = (5L/7)^(1/2)
Therefore, the optimal amount of capital and labor as a function of q is:
K(q) = (5q/42)^(1/2)
L(q) = (7q/30)^(1/2)
(b) Using the optimal amounts of capital and labor found in (a), we can solve for the (minimized) cost function C(q):
C(q) = 5L(q) + 3K(q)²L(q)/q = 5(7q/30)^(1/2) + 3(5q/42)^(1/2)(7q/30)^(1/2)
C(q) = 5(7q/30)^(1/2) + 5(7q/30)^(3/2)
(c) To determine the type of returns to scale, we can calculate the output elasticity of the production function. The output elasticity is defined as:
E = (∂q/∂K) * (K/q) + (∂q/∂L) * (L/q)
Substituting the production function and its partial derivatives, we get:
E = 2K/q + K²L/q
E = 2(5q/42)^(1/2)/q + (5q/42)^(2/3)(7q/30)^(1/2)/q
E = 5^(1/6) * 7^(1/3) * q^(1/6)
Since the output elasticity is a constant, independent of q, the production function exhibits constant returns to scale.
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Salaz Group Limited was listed on ASX in 1999, and is headquartered in Newcastle, New South Wales, Australia. The company’s business focuses on manufacturing and distributing building fixtures and fittings to residential and commercial premises in Australia, New Zealand, the United Kingdom, China, and other countries. The company offers vitreous china toilet suites, basins, plastic cisterns, taps and showers, baths, kitchen sinks, laundry tubs, smart products, and bathroom accessories, as well as domestic water control valves under various brands.
To expand its market in New Zealand, the Group acquired Bath & Bed Limited for consideration of NZ$107.5M on 12 November 2020. The size of the acquisition had a pervasive impact on the financial statements. The Group engaged an independent valuation expert to advise on the identification and measurement of acquired assets and liabilities, in particular determining the allocation of purchase consideration to goodwill and separately identifiable intangible assets.
On 17 June 2021, Salaz secured an additional long-term loan of $27 million with its current bank. The loan will be released in July 2021 and will be used to pay for another long-term loan that will fall due in the same month.
To ensure a good availability of stock in stores and on-time delivery, Salaz must maintain a reasonable level of inventory. The inventory has a very large range of items, from very cheap (e.g. taps) to very expensive (e.g. luxury bathtubs). In the past two years, the industry has moved fast due to changes in customer preferences, new products, and fast-moving product. Many of Salaz’s models have to be discontinued.
Salaz generates approximately 30% of its revenue from supplying items to builders for their construction jobs at residential premises (new builds, renovations, and replacements). Builders can purchase Salaz’s products on credit up to $50,000 for each construction job and pay once the job is finished. A construction job can last from a few days up to four months. For each job, the builder provides Salaz’s warehouse staff with a list of items required. Items are then packed and delivered to the construction site. The delivery dockets will be given weekly to an accountant who manages inventory, invoices and payments. Each builder has a customer code number, and the same for each construction job.
The New Zealand and United Kingdom markets were both impacted significantly as COVID19 restrictions were implemented. In response to the lockdown restrictions in the United Kingdom and New Zealand, 98 staff were retrenched during those periods. However, Salaz grew share in the United Kingdom and maintained share in New Zealand, and the management is confident of a bounce back in these markets.
The fixed remuneration of the Board and Group Executive was reduced by 20 per cent for the period 1 April 2021 to 30 June 2021. In addition, there were no short-term incentive payments for all executives for FY21 as the financial gateways were not achieved due to the weaker market activity and the negative impact of the pandemic on revenue and earnings for the Group.
Overall, despite the economic downturn due to COVID, the management believes that the company will remain well capitalised to manage through the current challenging conditions, continue to generate strong operating cashflow, and drive growth through new and smart products and good management.
Risk Assessment
From the background and financial information given above:
• identify and explain four (4) potential HIGH risks, including BOTH inherent risk and control risk (doesn’t matter how many of each).
• for each risk listed, identify the type of risk (inherent risk or control risk), and the associated financial accounts and key assertions that would be affected.
Please use the following table to present your answers:
Potential risk identified – (a) state type of risk, (b) description with information from
case study
Accounts
Assertions
Risk: Inventory obsolescence due to fast-moving industry changes | Inherent Risk | The fast-moving industry and changes in customer preferences pose a risk of inventory obsolescence as many of Salaz's models have to be discontinued. | Inventory | Existence, Valuation
Risk: Credit risk from builders' unpaid balances | Inherent Risk | Builders purchasing products on credit up to $50,000 for each construction job and paying upon completion introduces the risk of unpaid balances and potential bad debts. | Accounts Receivable | Existence, Valuation
Risk: Market volatility and economic downturn | Inherent Risk | The impact of COVID-19 and lockdown restrictions in the United Kingdom and New Zealand has caused market volatility and an economic downturn, which can affect revenue and earnings for the Group. | Revenue, Earnings | Completeness, Valuation
Risk: Inadequate internal controls over financial reporting | Control Risk | Reduction in remuneration and retrenchment of staff during COVID-19 may have strained internal controls, increasing the risk of errors or irregularities in financial reporting. | Internal Controls | Completeness, Accuracy.
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You are given: (i) Loss sizes X follows a two-parameter Pareto distribution. (ii) Payment per payment for an insurance without a deductible is 800. (iii) Payment per payment for an insurance with a deductible of 500 is 1100. Calculate payment per loss for an insurance with a deductible of 1000.
The Pareto distribution is a probability distribution used to model extreme events, such as large losses in insurance. It is defined by two parameters: the shape parameter (alpha) and the scale parameter (x_m). In this case, the loss sizes X follow a two-parameter Pareto distribution.
From the given information, we know that the payment per loss for an insurance without a deductible is 800 and the payment per loss for an insurance with a deductible of 500 is 1100. the payment per loss for an insurance with a deductible of 1000, we need to determine the parameters of the Pareto distribution.Let's denote the shape parameter as alpha and the scale parameter as x_m. We can use the information provided to set up two equations:
After finding the values of alpha and x_m, we can use the Pareto distribution to calculate the payment per loss for an insurance with a deductible of 1000.Keep in mind that this is a general approach, and the specific values of alpha and x_m will depend on the data and assumptions of the problem. It is essential to ensure that the assumptions of the Pareto distribution are valid for the given problem and data.
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The amount of cash a company paid in dividend can be found in the balance sheet. a) True. b) False.
The statement "The amount of cash a company paid in dividend can be found in the balance sheet" is false.A dividend is a portion of a company's earnings that is distributed to its shareholders in the form of cash or additional stock.
It is usually paid out to the company's shareholders quarterly, semi-annually, or annually.The following are some essential features of dividends:It is a portion of the company's earnings that is distributed to its shareholders.Dividends are usually paid in the form of cash or additional stock.
The board of directors determines the dividend payment amount, which is then approved by the shareholders.The balance sheet is a financial statement that shows the company's assets, liabilities, and equity at a specific point in time.
It is not the place where information about dividend payments can be found. As a result, the given statement is false.
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Sunset Ltd. purchased new machinery worth $820,000. The machine
will allow the company to increase production by 35,000 units per
year at $39 per unit. Variable costs per unit are $15 and the fixed
co
(a) The Pro-Forma Statement of Comprehensive Income calculates the revenue = $1,365,000, variable costs = $525,000, fixed costs = $200,000, depreciation expense = $152,200/year , and net income after taxes for the next year = $292,680.
(b) The Present Value of the CCA Tax Shield is equal to $83,390.
(a) The Pro-Forma Statement of Comprehensive Income is prepared by considering the revenue from the increased production, deducting the variable costs, fixed costs, and depreciation expense. The net income before taxes is then adjusted for taxes to determine the net income after taxes.
Revenue: 35,000 units/year * $39/unit = $1,365,000
Variable costs: 35,000 units/year * $15/unit = $525,000
Fixed costs: $200,000
Depreciation expense: ($820,000 - $59,000) / 5 years = $152,200/year (straight-line method)
Net income before taxes: Revenue - Variable costs - Fixed costs - Depreciation expense = $487,800
Net income after taxes: Net income before taxes * (1 - Tax rate) = $292,680 (assuming a tax rate of 40%)
(b) The CCA Tax Shield is calculated by multiplying the CCA expense, which is determined using the CCA rate, by the tax rate. The Present Value of the CCA Tax Shield is obtained by discounting the CCA Tax Shield using the required rate of return.
CCA expense: $820,000 * 30% = $246,000 (assuming a CCA rate of 30%)
Tax shield: CCA expense * Tax rate = $246,000 * 40% = $98,400
Present Value of the CCA Tax Shield: $98,400 / (1 + Required rate of return) = $98,400 / (1 + 18%) ≈ $83,390
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Sunset Ltd. purchased new machinery worth $820,000. The machine will allow the company to increase production by 35,000 units per year at $39 per unit. Variable costs per unit are $15 and the fixed costs per year are $200,000. The machinery is valued to be worth $59,000 after 5 years. Depreciation using the straight-line method. The required rate of return on the project using this machinery is 18% and a marginal tax rate of 40% is applicable to the company. (a) Develop the Pro-Forma Statement of Comprehensive Income for the next year. (8 points) (b) If the CCA rate applicable on the machinery is 30%, compute the present value of the CCA tax shield for the machinery.
You have just invested your savings of $25,000. What range of returns on your investment would you feel most comfortable with after 1 years?
a. $24,000-$26,500
b. $23,000-$28,000
c. $21,000-$31,000
d. $19,000-$34,000
When an individual invests in a scheme, it is essential to consider the rate of return. A rate of return is the amount that an investment generates in addition to its initial expense over time. So, to know about the range of returns on investment one would feel most comfortable with after 1 year, given an investment of savings of $25,000. The best option would be option "b. $23,000-$28,000".
Explanation:- Rate of return is the profit you get from your savings over a period. Here, we have to calculate the range of returns on savings for 1 year.
Therefore, it is necessary to consider the investment and the rate of return. The different options are:$24,000 - $26,500.$23,000 - $28,000.$21,000 - $31,000.$19,000 - $34,000.
In the above options, the range of returns on the investment in option b. $23,000-$28,000 would be most comfortable. The rate of return could be calculated as follows:- Rate of return = (Final amount – Initial amount) / Initial amount. The rate of return for the investment would be($28,000 - $25,000) / $25,000= $3,000 / $25,000= 0.12 or 12%.
Therefore, the range of returns on investment of savings of $25,000 would be $23,000-$28,000 with a rate of return of 12% after 1 year.
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10.
Most of the goods and services in the United States are produced
by government and the rest are produced by firms and not-for-profit
organizations.
a. True
b. False
b. False. In the United States, the majority of goods and services are produced by private firms, while the government's role is primarily focused on regulation, public goods, and certain sectors such as healthcare and education.
The statement is false.
In the United States, the majority of goods and services are not produced by the government. Instead, they are primarily produced by private firms operating in various industries such as manufacturing, services, and agriculture.
These firms, driven by profit motives, play a significant role in the economy by creating and delivering goods and services to meet consumer demand.
Additionally, not-for-profit organizations also contribute to the production of certain goods and services, particularly in sectors such as healthcare, education, and social services.
However, the overall production and provision of goods and services are predominantly carried out by private firms rather than the government.
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journalists and all media employees have a code of ethics that they must adhere to. we are the consumers of what they make available to us through the different forms of media.Do we have code of ethics that should be followed and if so what are some of those ?
Consumers of media don't have a formal code of ethics, but they can follow principles such as seeking accurate information, being critical of sources, and promoting respectful engagement.
As consumers of media, we don't have a formal code of ethics like journalists and media employees do. However, there are general principles and guidelines that individuals can follow when engaging with media content. These include seeking accurate and reliable information, being critical of sources, respecting privacy and consent, promoting diversity and inclusivity, avoiding spreading misinformation, and engaging in constructive and respectful dialogue. Personal responsibility and critical thinking are essential in evaluating and consuming media to ensure ethical behavior as recipients of information and participants in online discussions.
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William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D Ordering cost S Holding cost H 19,400 units/year $24/order $5/unit/year a) The EOQ for the workbooks is (round your response to the nearest whole number). b) What are the annual holding costs for the workbooks? $ (round your response to the nearest whole number). c) What are the annual ordering costs? $ (round your response to the nearest whole number
A) The Economic Order Quantity (EOQ) for the workbooks is 559. B) The annual holding cost for the workbooks is $1398.C) The annual ordering cost for the workbooks is $836.
a) The Economic Order Quantity (EOQ) formula is used to determine the optimal quantity of goods to order at one time to minimize the total cost of inventory management, assuming that demand, ordering costs, and holding costs are constant. EOQ = √(2DS/H).
Given: Demand (D) = 19,400 units/year, Ordering cost (S) = $24/order, Holding cost (H) = $5/unit/year
The EOQ for workbooks = √(2DS/H) = √(2*19400*24/5) = 559.16 ≈ 559 (rounded to the nearest whole number)
The Economic Order Quantity (EOQ) for the workbooks is 559 (rounded to the nearest whole number).
b) The annual holding cost is calculated by multiplying the EOQ by the holding cost per unit and then dividing by two. Annual Holding Cost = (Q/2) * H = (559/2) * $5 = $1397.50 ≈ $1398 (rounded to the nearest whole number).
The annual holding cost for the workbooks is $1398 (rounded to the nearest whole number).
c) The annual ordering cost can be calculated by multiplying the annual demand by the cost per order and dividing by the EOQ.
Annual Ordering Cost = (D*S)/Q = (19400*24)/559 = $836.13 ≈ $836 (rounded to the nearest whole number).
The annual ordering cost for the workbooks is $836 (rounded to the nearest whole number).
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Question 3 (15 marks) Jumba Jookiba Inc. has the following inventory purchases during the fiscal year ended December 31, 2020. • Beginning 200 units $55/unit . Feb 18 450 units $56/unit • Apr 30 200 units $57/unit . May 18 230 units $58/unit • Nov 20 345 units $59/unit Jumba Jookiba Inc. employs the perpetual inventory system and had sales during the year in December of 865 units. Required: 1. Calculate units remaining in ending inventory. 2. Calculate the dollar value of ending inventory using (a) FIFO method; (b) Weighted-Average method.
The dollar value of ending inventory using the Weighted-Average method is $20,592.
To calculate the units remaining in ending inventory, we need to add up the total units purchased throughout the year and subtract the units sold during the year. The calculation is as follows:
Beginning inventory: 200 units
Plus purchases:
Feb 18: 450 units
Apr 30: 200 units
May 18: 230 units
Nov 20: 345 units
Total units purchased: 1225 units
Minus units sold: 865 units
Units remaining in ending inventory: 360 units
Therefore, Jumba Jookiba Inc. has 360 units remaining in ending inventory.
(a) To calculate the dollar value of ending inventory using the FIFO method, we assume that the first goods purchased are the first goods sold. Therefore, the cost of goods sold will be based on the most recent purchases. The calculation is as follows:
Units sold: 865 units
Cost of goods sold:
Nov 20: 345 units x $59 = $20,355
May 18: 230 units x $58 = $13,340
Feb 18: 290 units x $56 = $16,240
Total cost of goods sold: $49,935
Ending inventory:
Apr 30: 200 units x $57 = $11,400
Beginning inventory: 160 units x $55 = $8,800
Total ending inventory: $20,200
Therefore, the dollar value of ending inventory using the FIFO method is $20,200.
(b) To calculate the dollar value of ending inventory using the Weighted-Average method, we need to calculate the weighted-average cost per unit and multiply by the units remaining in ending inventory. The calculation is as follows:
Total cost of purchases: ($55 x 200) + ($56 x 450) + ($57 x 200) + ($58 x 230) + ($59 x 345) = $70,155
Total units purchased: 1225 units
Weighted-average cost per unit: $70,155 ÷ 1225 = $57.20
Ending inventory:
Units remaining in ending inventory: 360 units
Weighted-average cost per unit: $57.20
Total ending inventory: 360 units x $57.20 = $20,592
Therefore, the dollar value of ending inventory using the Weighted-Average method is $20,592.
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