Answer:
Cash flows associated with the Note are 12 semiannual coupon payments of $17.50 each and the face value of $1,000
Explanation:
The cash flows of the note comprise of the semiannual coupon payments for 6 years ,which is 12 semiannual coupon payments, since 2 semiannual coupon payments would be made in each of the 6 years until maturity of the U.S. Treasury Note as well as the face value of the note , which is $1000 payable to the investors in the note at maturity.
semiannual coupon payment=face value*coupon rate*6/12
face value=$1,000
coupon rate=3.5%
semiannual coupon payment=$1000*3.5%*6/12
semiannual coupon payment=$17.50
face value=$1000
Sherry is known for being very task oriented in her approach to manage subordinates. Which at the following statement is noot likely to describe sherry?
a. She tends to work to develop trusting relationships with subordinates.
b. She tends to be very involved in task assignments and defining work schedules.
c. She tends to write standard operating procedures for her employees.
d. She tends to be one-way and top-down in her
Answer:
a. She tends to work to develop trusting relationships with subordinates.
Explanation:
since in the given situation it is mentioned that sherry to be called as the very task oriented person in order to manage the subordinates so as per the given situation the first option is correct as it is not describe her behavior that she develop the relationship with the subordinates in a trust worthy way
So the option a is correct
Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2016, for $6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2017, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2017 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.
1. How much warranty expense does the company report in 2016 for this copier?
2. How much is the estimated warranty liability for this copier as of December 31, 2016?
3. How much warranty expense does the company report in 2017 for this copier?
4. How much is the estimated warranty liability for this copier as of December 31, 2017?
5. Prepare journal entries to record (a) the copier’s sale; (b) the adjustment on December 31, 2016, to recognize the warranty expense; and (c) the repairs that occur in November 2017.
Answer:
1. $240
2. $240
3. $0
4. $31
5. August 16, 2016
Dr Cash $6,000
Cr Sales $6,000
Aug. 16, 2016
Dr Cost of goods sold $4,800
Cr Merchandise inventory $4,800
Dec 31,2016
Dr Warranty expense $240
Cr Estimated warranty liability $240
Nov. 22, 2017
Dr Estimated warranty liability $209
Cr Repair parts inventory $209
Explanation:
1. Calculation to determine How much warranty expense does the company report in 2016 for this copier
Warranty expense = 4% × $6,000
Warranty expense= $240
Therefore the amount of warranty expense that the company report in 2016 for this copier is $240
2. Calculation to determine How much is the estimated warranty liability for this copier as of December 31, 2016
Estimated warranty liability= 6% × $6,000
Estimated warranty liability= $240
Therefore estimated warranty liability for this copier as of December 31, 2016 is $240
3. The 2017 warranty expense that the company report in 2017 for this copier will be $0 because NO ADDITIONAL WARRANTY EXPENSE in the year 2017 should be reported for this copier
4. Calculation to determine how much is the estimated warranty liability for this copier as of December 31, 2017
2017 ESTIMATED WARRANTY LIABILITY
Beginning 2017 balance $240
(4%*$6,000)
Less Parts cost ($209)
Ending 2017 balance $31
Thereforea m the estimated warranty liability for this copier as of December 31, 2017 is $31
5. Preparation of the journal entries
August 16, 2016
Dr Cash $6,000
Cr Sales $6,000
Aug. 16, 2016
Dr Cost of goods sold $4,800
Cr Merchandise inventory $4,800
Dec 31,2016
Dr Warranty expense $240
Cr Estimated warranty liability $240
Nov. 22, 2017
Dr Estimated warranty liability $209
Cr Repair parts inventory $209
Consider two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.2. Stock B has an expected return of 14% and a beta of 1.8. The expected market rate of return is 9% and the risk-free rate is 5%. Security __________ would be considered the better buy because
Answer:
B; it offers an expected excess return of 1.8%
Explanation:
Here are the options :
A; it offers an expected excess return of .2%A; it offers an expected excess return of 2.2%B; it offers an expected excess return of 1.8%B; it offers an expected return of 2.4%
to determine which stock is the better buy, we have to calculate the expected return of the stocks using CAPM
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
Stock A = 5% + 1.2(9% - 5%) = 9.8%
Stock B = 5% + 1.8(9% - 5%) = 12.20%
The next step is to determine the excess return
stated expected return - calculated expected return = excess return
Stock A's excess return = 10% - 9.8% - 0.2%
Stock B's excess return = 14 - 12.20 = 1.8%
Security B would be considered because it has a higher excess return
Miguel works for an organization that collects books from donors and redistributes the books to schools to promote literacy and good reading habits. The company is funded by a government grant. Miguel works for a(n) ________.
You sell 25,000 loaf of bread per year. The carrying cost associated the main ingredient wheat flour is estimated to be $8 per unit (amount used for 1 loaf of bread) per year, and the ordering cost is $10 per order. And assume 1 year is 300 days and lead time is 3 days.
Required:
a. What is the EOQ?
b. How much money you will lose if you order 300 units of wheat flour? Calculate the total cost of inventory with EOQ model and with order size is 300. The difference will give you the answer.
c. Calculate the re-order point (assuming no uncertainty)?
Answer:
Annual Demand (D) = 25000
Carrying Cost (H) = 8
Ordering Costs (S) = 10
Number of working days = 300
Lead Time (Lt) = 3 days
a. EOQ = Sqrt (2*D*S/H)
EOQ = Sqrt (2*25000*10/8)
EOQ = Sqrt (62500)
EOQ = 250
b. Total Cost = (D * S) / EOQ + (EOQ * H) / 2
Total Cost = (25000 * 10) / 250 + (250 * 8) / 2
Total Cost = 1000 + 1000
Total Cost = 2000
Now, we calculate total Cost with order size: of 300
Total Cost = (25000 * 10) / 300 + (300 * 8) / 2
Total Costs = 833.3333 + 1200
Total Cost = 2,033.3333
The amount to lost if we order 300 units of wheat flour is as follows
= 2033.33 - 2000
= $33.33
3. ROP = (D / Number of working days) x Lt
ROP = (25000 / 300) * 3
ROP = 83.3333 * 3
ROP = 249.9999
ROP = 250
In the liquidation of a partnership, any gain or loss on the realization of noncash assets should be allocated Group of answer choices first to creditors and the remainder to partners. to the partners on the basis of their capital balances. to the partners on the basis of their income-sharing ratio. only after all creditors have been paid.
Answer:
to the partners on the basis of their capital balances.
Explanation:
When the partnership is liquidated so any gain or loss that should be realized on non-cash asset should be distributed to the partners based on their capital balances. As at the time of gain or loss the sale of the non-cash assets should be distributed to the partners at their profit sharing ratio
therefore as per the given situation, the above represent the answer
A company's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130. The amount of sales required to realize an operating income of $200,000 is Group of answer choices
Answer:
The answer is 14,167 units
Explanation:
Target sales is the amount of sales a company has projected itself to sell within a particular period.
Target sales(in units) =
(Fixed cost + target income) / contribution margin
Where contribution margin is sales in unit minus variable costs
($1,500,000 + $200,000) / $250 - $130
$1,700,000/$120
=14,167 units
Therefore, 14,167 units is the amount of sales that will need to be recorded to generate an operating income of $200,000
Part of the budgeting process is summarizing the financial statement effects on the budgeted income statement and the budgeted balance sheet.
a. true
b. false
Answer:
a. true
Explanation:
The production, sales, and the financial objected of the company are predicted via applying the various independent budgets. Also these budget should become the portion of the master budget. The impact should be collated on the budgeted balance sheet, income statement, and the cash budget
Therefore the given statement is true
Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $7.00 per bottle which is expected to decrease sales by 20%. If the price is raised, the number of units that must be sold to keep the profits unchanged is
Answer:
131,250= number of units
Explanation:
Giving the following information:
We need to calculate the number of units to be sold to maintain a profit of $175,000.
Unitary variable cost= $3
Fixed expenses= $350,000
Selling price= $7
Net income= total contribution margin - fixed cost
175,000= number of units*(7 - 3) - 350,000
525,000 = number of units*4
525,000 / 4= number of units
131,250= number of units
At the beginning of the year, American International had inventory worth $325,500 at cost. At the end of the year, the cost value of the inventory was $540,250. If annual cost of goods sold was $1,978,250 find the inventory turnover at cost for the year. (Round your answer to the nearest tenth) Group of answer choices
Answer:
Inventory turnover= 4.57
Explanation:
To calculate the inventory turnover, we need to use the following formula:
Inventory turnover= Cost of goods sold/ average inventory
Average inventory= (beginning inventory + ending inventory) / 2
Average inventory= (325,500 + 540,250) / 2
Average inventory= 432,875
Inventory turnover= 1,978,250 / 432,875
Inventory turnover= 4.57
Assume , and suppose that is initially equal to 0. Suppose that the rate of unemployment is initially equal to the natural rate. In year , the authorities decide to bring the unemployment rate down to 3% and hold it there forever. b. Determine the rate of inflation in years , , , and . c. Do you believe the answer given in (b)
The question is incomplete. The complete question is :
Suppose that the Phillips curve is given by :
[tex]$\pi_t=\pi_t^e+0.1-2u_t$[/tex]
a). What is the natural rate of unemployment ?
Assuming [tex]$\pi_t^e=\theta \pi_{t-1}$[/tex] , and suppose that [tex]$\theta$[/tex] is initially equal to 0. Suppose that the rate of unemployment is initially equal to the natural rate. In year t, the authorities decide to bring the unemployment rate down to 3% and hold it there forever.
b). Determine the rate of inflation in years t, t+1, t+2 and t+5.
c). Do you believe the answer given in (b)? Why or why not?
Solution :
Given the equation :
[tex]$\pi_t=\pi_t^e+0.1-2u_t$[/tex]
a). At [tex]$u_N$[/tex], [tex]$\pi_t = \pi_t^e$[/tex] (Inflationary exponents are constant)
[tex]$0.1 = 2u_N$[/tex]
∴ [tex]$u_N=0.05$[/tex]
= 5%
b). [tex]$\pi t^e=\theta \pi_{t-1}$[/tex]
Let [tex]$\theta = 0$[/tex], then [tex]$\pi t^e = 0$[/tex], [tex]u-u_N=3\%[/tex]
Now for year t [tex]$\pi t^e=0, \pi_t= 0.1-2(0.03)=0.04=4\%$[/tex]
[tex]$(t+1) : \pi (t+1)^e=0, \pi (t+1) = \pi t = 4\%[/tex]
[tex]$= \pi (t+2)= \pi (t+5) = 4\%$[/tex]
c). No, I do not believe as
[tex]\pi t^e=0[/tex], but πt comes out to be 4%, [tex]$\pi (t+1)^e=0$[/tex] but [tex]\pi (t+1)= 4 \%[/tex].
If inflation is consistently positive, why to make the expectations of zero percentage.
If a company is overly optimistic about debt collection, the company will understate bad debt expense and:
Answer:
overstate net income but days to collect will increase.
Explanation:
A bad debt expense is defined when any receivable is no more collectible as the customer is not able to fulfil or satisfy the obligation in order to pay the obligation of paying an outstanding debt because of some financial problems or due to bankruptcy.
Thus when any organization is more optimistic about the debt collection, it will understate the bad debt expenses and will also overstate the net income. But in this case the number of days to collect the payment increases.
Photo Framing's cost formula for its supplies cost is $1,000 per month plus $10 per frame. For the month of November, the company planned for activity of 610 frames, but the actual level of activity was 600 frames. The actual supplies cost for the month was $7,600. The spending variance for supplies cost in November would be closest to:
Answer:
$600 U
Explanation:
Calculation to determine what The spending variance for supplies cost in November would be closest to:
Actual results$ 7600
Less Flexible budget $7,000
($1,000 + $10 × 600)
Spending variance $600 U
($7,600-$7,000)
Therefore The spending variance for supplies cost in November would be closest to: $600 U
1. Prepare the December 31 adjusting entries for the following transactions. Omit explanations. 1. Fees accrued but not billed, $6,300. 2. The supplies account balance on December 31, $4,750; supplies on hand, $960. 3. Wages accrued but not paid, $2,700. 4. Depreciation of office equipment, $1,650. 5. Rent expired during year, $10,800.
Answer:
1. Debit Accounts Receivable $6300
Credit Fees Revenue $6300
2. Debit Supplies Expense $3790
Credit Supplies $3790
3. Debit Wages Expense $2700
Credit Wages Payable $2700
4. Debit Depreciation Expense $1650
Credit Accumulated Depreciation-office equip. $1650
5. Debit Rent Expense $10800
Credit Prepaid Rent $10800
Explanation:
Preparation of the December 31 adjusting entries
1. Debit Accounts Receivable $6300
Credit Fees Revenue $6300
2. Debit Supplies Expense $3790
Credit Supplies $3790
(4750-960)
3. Debit Wages Expense $2700
Credit Wages Payable $2700
4. Debit Depreciation Expense $1650
Credit Accumulated Depreciation-office equip. $1650
5. Debit Rent Expense $10800
Credit Prepaid Rent $10800
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you. a. If the company has 470,000 shares outstanding and the stock currently sells for $41, how much will it cost you to buy a seat if the company uses straight voting
Answer: $9,635,041
Explanation:
With 470,000 shares, you will need to hold a majority to vote yourself into the board.
To gain a majority, you need more than 50% of the shares:
= 470,000 / 2 + 1 share to give you majority
= 235,001 shares
The cost of 235,001 shares is:
= 235,001 * 41
= $9,635,041
What is the total cost to move products between work centers A and D, and between work centers B and C combined
Answer:
More than $0 but less than or equal to $100.
Explanation:
The transportation cost is $2.
Load summary is AB = 12, AC = 25, AD = 12, BC = -19, BD = 21, CD = 34.
The total cost to move product between A and D and B and C combined is ;
A and D = 12 * $2 = $24
B and C = 19 * $2 = $38.
The annual demand of product Y is 1908 units. The ordering cost is $45 per order. Holding cost is $15 per unit per year. Calculate the annual ordering cost when the lot size (i.e., the fixed order quantity) is 67 units.
(Select the appropriate range in which your answer falls.]
a. More than 0 but less than or equal to 700
b. More than 700 but less than or equal to 850
c. More than 850 but less than or equal to 1000
d. More than 1000 but less than or equal to 1150
e. More than 1150
Answer:
Option E
The annual ordering cost is more than $1150
Explanation:
The ordering costs include all the clerical, administrative and transportation costs associated with placing an order.
Annual ordering cos = ordering cost per order × number of order
No of order = Annual demand/order quantity
= 1908/67= 28.47 orders
Annual ordering cost = 28.47× 45= $1281.49
Annual ordering cost =$1281.49
The annual ordering cost is more than $1150
Which of the following is an example of a positive economic statement? Question 19 options: a) Corrupt politicians ought to be voted out of office. b) An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased. c) Marginal tax rates should be reduced for individuals in the highest tax bracket. d) Workers with families should be paid at least the minimum wage. e) If crime rates were reduced, the world would be a better place to live.
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity (YTM) has a coupon rate of 6%. The yield to maturity of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:_________.
a.) $841,635.85
b.) $715,390.47
c.) $530,230.59
d.) $1,009,963.02
Answer:
a.) $841,635.85
Explanation:
The value of the Treasury note is the present value of its future cash flows, its semiannual coupon payments and the face value receivable by the investors in the T-note at maturity.
Semiannual coupon=face value*coupon rate*6/12
face value=$1,000,000
coupon rate=6%
semiannual coupon=$1,000,000*6%*6/12
semiannual coupon=$30,000( there would 8 semiannual coupons in 4 years)
The present value of the cash flows can be determined using a financial calculator bearing in mind that the calculator would be set to its default end mode before making the following inputs:
N=8(semiannual coupons)
PMT=30000(amount of each semiannual coupon)
I/Y=5.50%(semiannual yield to maturity=11.00%*6/12)
FV=1000000(the face value of T-note)
CPT
PV=$841,635.85
An example of a push strategy is ________. organizing couponing campaigns utilizing newspaper advertising using television advertising employing direct marketing paying a shelf fee
Answer: Using television advertising
Explanation:
Push marketing strategy, refers to the strategy whereby take its products to the consumers in order to increase the exposure of the product.
Push marketing simply means pushing the brand through the use of promotions and paid advertisiment. On the other hand, pull strategy draws customers towards the product.
Cape Corp. will pay a dividend of $3.60 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever. a. If you want a return of 17 percent, how much will you pay for the stock
Answer:
$30
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
$3.6 / (0.17 - 0.05)
$3.60 / 0.12 = $30
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 44,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $521,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $687,120 and its actual total direct labor was 44,500 hours. Required: Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)
Answer:
Predetermined manufacturing overhead rate= $13.84 per direct labor hour
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (521,000 / 44,000) + 2
Predetermined manufacturing overhead rate= 11.84 + 2
Predetermined manufacturing overhead rate= $13.84 per direct labor hour
Ramble On Co. wishes to maintain a growth rate of 13.6 percent per year, a debt-equity ratio of 1.8, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at .98. What profit margin must the firm achieve
Answer: 5.99%
Explanation:
Based on the question,
Dividend payout ratio = 30%
Therefore, the retention ratio will be:
= 1 - 30%
= 70%
Growth rate = 13.6%
We'll the use the sustainable growth rate formula which will be:
0.136 = (ROE x 0.7)/ (1-(ROE x 0.7))
0.136(1 - (0.7ROE)) = 0.7ROE
ROE = 0.136/0.7952
ROE = 0.171026
Then, the Profit margin will be:
ROE = Profit Margin x Asset Turnover x Equity multiplier
0.171026 = PM x (1/0.98) x (1 + 1.8)
0.171026 = PM x (1/0.98) x 2.8
PM = 0.171026 x 0.98/2.8
PM = 0.0598591
Profit margin = 5.99%
Privett Company
Accounts payable $32,581
Accounts receivable 74,771
Accrued liabilities 6,290
Cash 24,116
Intangible assets 42,381
Inventory 74,844
Long-term investments 95,587
Long-term liabilities 79,677
Marketable securities 31,145
Notes payable (short-term) 24,824
Property, plant, and equipment 671,789
Prepaid expenses 2,412
Based on the data for Privett Company, what is the amount of quick assets?
a. $1,660,292
b. $823,594
c. $119,071
d. $53,633
Answer:
$130,032
Explanation:
Calculation to determine the amount of quick assets
Using this formula
Quick assets=Accounts receivable +Cash+Marketable securities
Let plug in the formula
Quick assets=$74,771+$24,116+31,145
Quick assets= $130,032
Therefore the amount of quick assets is $130,032
Suppose that the production function is y= 9k^0.5 N^0.5. With this production function, the marginal product of labor is MPN= 4.5K^0.5 N^-0.5. The capital stock is K= 25. The labor supply curve is NS= 100[(1-t)w]^2, where w is the real wage rate, t is the tax rate on labor income, and hence (1-t)w is the after-tax real wage rate.
Required:
a. Assume that the tax rate on labor income, t, equals zero. Find the equation of the labor demand curve. Calculate the equilibrium levels of the real wage and employ- ment, the level of full-employment output, and the total after-tax wage income of workers.
b. Repeat part (a) under the assumption that the tax rate on labor income, t, equals 0.6.
Answer:
A) i) w/P = MPN , ( NS ) = 100[ (1-t) w]^2
ii) w = 1.5 , N = 225,
iii) y = 675 ,
iv) 337.5
B) i) ( NS ) = 100[(1-0.6)w]^2
ii) w = 2.372 , N = 90
iii) y = 426.91
iv) 85.839
Explanation:
Given data :
Production function ( y ) = 9k^0.5 N^0.5
MPN = 4.5k^0.5N^-0.5
capital stock ( K ) = 25
labor supply curve ( NS ) = 100[ (1-t) w]^2
assume P = 1
a) Determine
i) equation of labor demand curve = w/P = MPN
where; w = 22.5 N^-0.5 , N=506.25/(w^2)
labor supply curve ( NS ) = 100[ (1-t) w]^2
ii) equilibrium levels of real wage and employment
506.25/(w^2) = 100[(1-t)w]^2 ( equilibrium condition )
w ( equilibrium level of real wage ) = 1.5
equilibrium level of employment = 100[(1-t)w]^2 ; where t = 0 , w = 1.5
= 100 ( 1 * 1.5 )^2
N = 225
iii) level of full-employment y = 9k^0.5 N^0.5 ; where N = 225 , k = 25
= 9(25)^0.5 * (225)^0.5
y = 675
iv) Total after-tax wage income of workers
= w*N = ( 225 * 1.5 ) = 337.5
B) assuming t = 0.6
i) equation of labor demand curve
labor supply curve ( NS ) = 100[(1-0.6)w]^2 = 16 w^2
ii) equilibrium levels ; 16w^2 = 506.25/(w^2).
w( equilibrium real wage ) = 2.372
Equilibrium employment ( N )= 16 * ( 2.372 )^2 =90
iii) level of full employment y = 9k^0.5 * 90^0.5
= 9(25)^0.5 * 90^0.5 = 426.91
iv) Total after tax wage/income of workers
= (1-0.6)*2.372*90 = 85.839
IF COUNTRIES FIND WAYS OF IMPROVING THEIR FACTOR OF PRODUCTIVITY
Answer:
THEIR FACTOR OF PRODUCTIVITY will increase.
A primary function of the promotional mix is to Multiple Choice explain how to use a product. persuade consumers to try a product. inform customers of complementary offerings. inform customers of pricing changes. point out flaws in competitors' products.
Answer: persuade consumers to try a product.
Explanation:
The Promotional Mix has to do with the promotional tools which are used by a company in order to create, and increase the demand for the goods and services offered by the company.
The Promotional Mix integrates promotional tools like direct marketing, personal selling, Advertising, Sales Promotion, etc
The promotional mix is useful in informing the prospective buyers about the importance of a good or service and also convince them to try it and the benefits attached to the product.
Lucy has decided to save for a vacation in 18 months. She will save the money into a short-term investment account returning 4% annually. How much will she have to put away at the beginning of each month if the vacation cost is $15,000
Answer:
Monthly deposit= $810.20
Explanation:
Giving the following information:
Number of periods (n)= 18 months
Interest rate (i)= 0.04/12= 0.0033
Future value (FV)= $15,000
To calculate the monthly deposit, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (15,000*0.0033) / [(1.0033^18) - 1]
A= $810.20
with the aid of graphs, illustrate the effect of a change in demand for chicken by restaurants to a chicken farmer
Answer:
Systematic component of demand = (level + trend) X seasonal factor
Explanation:
Now in the given case, we can use the above equation as well as graphs based on historical trends to define the demand of chicken during each season. When the demand is high, chicken prices can lead to an increase with more pressure on chicken farmer to supply more chicken.
Favre and Carter Law Office employ 12 full-time attorneys and 5 paraprofessionals. Budgeted salaries include $100,000 for each attorney and $30,000 per paraprofessional. For 20x1, indirect costs were budgeted at $250,000, but actually amounted to $300,000. Actual salaries were $110,000 for each attorney and $30,000 for each paraprofessional. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Total budgeted labor-hours were 50,000; however, actual labor-hours were 60,000.
How much should the client be billed in a normal costing system which uses budgeted rate and cost allocations are based on actual data, when 1,000 professional labor-hours were used?
a. $27,000
b. $32,000
c. $34,800
d. $37,400
Answer:
Billed costs= $32,000
Explanation:
Giving the following information:
Total estimated cost attorney= 12*100,000= $1,200,000
Total estimated cost paraprofessional= 5*30,000= $150,000
Estimated Indirect costs= $250,000
Estimated number of hours= 50,000
First, we need to calculate the allocation rate:
Allocation rate= total estimated costs for the period/ total amount of allocation base
Allocation rate= (1,200,000 + 150,000 + 250,000) / 50,000
Allocation rate= 1,600,000/50,000
Allocation rate= $32
Now, for 1,000 hours:
Billed costs= 1,000*32= $32,000
