Work in process inventory, September 1 (2,000 units, 100% complete with respect todirect materials, 80% complete with respect to direct labor and overhead; includes$45,000 of direct material cost, $25,600 in direct labor cost, $30,720 overhead cost) $ 101,320 Units started in April 28,000 Units completed and transferred to finished goods inventory 23,000 Work in process inventory, September 30 (? units, 100% complete with respect to direct materials, 40% complete with respect to direct labor and overhead) ? Costs incurred in September Direct materials $ 375,000 Conversion $ 341,000Required:Compute each of the following, assuming Hi-Test uses the weighted-average method of process costing.(Round "Cost per EUP" to 2 decimal places.)1. The number of physical units that were transferred out and the number that are in ending work in process inventory.2&3. The number of equivalent units for materials and conversion for the month.4&5. The cost per equivalent unit of materials and conversion for the month6. The total cost of goods transferred out.7. The total cost of ending work in process inventory.
Answer:
1. Number of physical units transferred out = 23,000 units
Number of units in ending work in process = 7,000 units
2. The number of equivalent units for materials = 30,000 units
3. The number of equivalent units for conversion = 25,800 units
4. The cost per equivalent units for materials = $14.00
5. The cost per equivalent units for conversion = $15.40
6. The total cost of goods transferred out = $676,200
7. The total cost of ending work in process inventory = $141,120
Explanation:
a) Data and Calculations:
Units Materials Conversion Total
Work in process inventory,
September 1 2,000 100% 80%
Cost of beginning WIP $45,000 $56,320 $101,320
Cost during April 375,000 341,000 716,000
Total production costs $420,000 $397,320 $817,320
Units started in April 28,000
Total units in process 30,000 (2,000 + 28,000)
Units transferred out 23,000 23,000 23,000
Ending WIP, Sept. 30 7,000 7,000 (100%) 2,800 (40%)
Total equivalent units 30,000 25,800
Cost per EUP $14.00 ($420,000/30,000) $15.40 ($397,320/25,800)
Cost of goods transferred out $322,000 $354,200 $676,200
($14.00 * 23,000) ($15.40 * 23,000)
Cost of ending WIP $98,000 $43,120 $141,120
($14.00 * 7,000) ($15.40 * 2,800)
Total costs accounted for $420,000 $397,320 $817,320
Suppose that the inflation rate is 2% and the real terminal value of an investment is expected to be $82,500 in 4 years. Calculate the nominal terminal value of the investment at the end of year 4.
Answer: $89300.65
Explanation:
Based on the information given in the question, the nominal terminal value of the investment at the end of year 4 will be calculated thus:
Inflation rate = 2%
Real terminal value of investment = $82,500
Normal terminal value of investment will be:
= $82500 × (1+2%)⁴
= $82500 × (1 +0.02)⁴
= $82500 × 1.02⁴
= $89300.65
Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $910. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 310 Units sold 280 Units in ending inventory 30 Variable costs per unit: Direct materials $ 130 Direct labor $ 350 Variable manufacturing overhead 50 Variable selling and administrative 40 Fixed costs: Fixed manufacturing overhead $ 62,000 Fixed selling and administrative $ 26,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 254,800 Cost of goods sold 204,400 Gross margin 50,400 Selling and administrative expense 37,200 Net operating income 13,200Required:1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.Total fixed manufacturing overhead in ending inventory: ?2. Prepare an income statement for the year using variable costing.
Answer:
1. 6,000
2. 7,200
Explanation:
1. Calculation to determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
Using this formula
Ending inventory=Fixed manufacturing overhead/Units produced*Ending units
Let plug in the formula
Ending inventory=62,000/310*30
Ending inventory=6,000
Therefore how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period is 6,000
2. Preparation of an income statement for the year using variable costing.
IDA SIDHA KARYA Company Variable Costing Income Statement
Units produced cost (130+350+50=530)
Sales $254,800
(280*910)
VARIABLE EXPENSES:
Variable cost of goods sold $148,400
(280*530)
Variable selling and administrative expense $11,200
(280*40)
Contribution margin $95,200
($254,800-$148,400-$11,200)
FIXED EXPENSES:
Fixed manufacturing overhead $62,000
Fixed selling and administrative expense $26,000
Net operating income $7,200
($95,200-$62,000-$26,000)
Therefore the income statement for the year using variable costing is $7,200
The Gear Division makes a part with the following characteristics:
Production capacity 25,000 units
Selling price to outside customers $ 18
Variable cost per unit $ 11
Fixed cost, total $ 100,000
Motor Division of the same company would like to purchase 10,000 units each period from the Gear Division. The Motor Division now purchases the part from an outside supplier at a price of $17 each. Suppose that the Gear Division is operating at capacity and can sell all of its output to outside customers. If the Gear Division sells the parts to Motor Division at $17 per unit, the company as a whole will be:
a. better off by $10,000 each period.
b. worse off by $20,000 each period.
c. worse off by $10,000 each period.
d. There will be no change in the status of the company as a whole.
Answer:
Effect on income= -10,000
Explanation:
Giving the following information:
Production capacity 25,000 units
Selling price to outside customers $ 18
Variable cost per unit $ 11
Fixed cost, total $ 100,000
First, we need to calculate the unitary total production cost:
Total unitary cost= (100,000/25,000) + 11
Total unitary cost= $15
The company can sell all of its production to outside customers and gain $3 from the sale. But, by selling to the Motor Division, it gains $2.
Now, the effect on income:
Effect on income= increase in income by not buying the part - decrease in sales revenue for not selling to outside customers
Effect on income= 10,000*2 - 10,000*3
Effect on income= 20,000 - 30,000
Effect on income= -10,000
Inventory which originally cost 50.0 is sold for 70.0 in cash. Which answer best describes how this transaction would be reflected in the company's balance sheet
Question Completion with Options:
a. Inventory decreases 50.0, cash increases 70.0, retained earnings increases 20.0
b. Cash increases 20.0, sales increases 70.0, inventory decreases 50.0
c. Retained earnings decreases 50.0, inventory decreases 50.0, retained earnings increases 70.0, accounts receivable increases 70.0
d. Inventory decreases 50.0, sales increase 70.0, cash increases 70.0, accounts payable decreases 50.0
Answer:
In the company's balance sheet:
a. Inventory decreases 50.0, cash increases 70.0, retained earnings increases 20.0
Explanation:
a) Data and Analysis:
Cash $70 Sales Revenue $70
Cost of goods sold $50 Inventory $50
b) In the company's balance sheet, the net effect will be an increase in the cash balance by $70 and a decrease of the ending inventory by $50. These two accounts are balanced by an increase in Retained Earnings, which are adjusted from the income statement, in the sum of $20 ($70 - $50).
The transactions which would be reflected in the balance sheet of the company are: Inventory decreases 50.0, cash increases 70.0, and retained earnings increases 20.0.
What is a balance sheet?A balance sheet is a financial statement that lists the assets and liabilities of a corporation at a certain point in time.
It is one of the three primary financial statements—the other two being the income statement and cash flow statement—that are used to assess a company's performance.
Information and analysis
Cash $70 $70 in sales revenue$50 was spent on the goods. $50 in inventoryThe net impact on the company's balance sheet will be an increase in cash by $70 and a reduction in ending inventory by $50.Retained Earnings are raised by $20 ($70 - $50), which is modified from the income statement in order to balance these two accounts.Thus, above is the amount that is to be reflected in the company balance sheet.
Learn more about balance sheet :
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Globalization of Market is taking place because of ___________.
What happens to the price of a three-year annual coupon paying bond with an 8% coupon when interest rates change from 8% to 8.96%
Answer:
It would reduce to -24.3185
Explanation:
I solved this on paper and have added the solution as an attachment
At 8% rate of interest the price of this bond is 1000
At 8.96% rate of interest the calculated price of the coupon bond is 975.681
975.681-1000 = -24.3185
When the interest rate falls from 8% to 8.96%, the price of the bond reduces by -24.3185
Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the current year. In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss. Elk's taxable income is:
Answer:
$80,000
Explanation:
Calculation to determine what Elk's taxable income is:
Using this formula
Taxable income=Operating income-Operating expenses
Let plug in the formula
Taxable income=$370,000-$290,000
Taxable income=$80,000
Therefore Elk's taxable income is:$80,000
Broker Bill has the exclusive listing for Terri’s home. Bill brought Terri an offer from Alexis, which Terri accepted. In order to expedite the transaction, Bill offered to handle the escrow if both Terri and Alexis agreed. Which statement is true?
Answer: Bill's offer is ethical and legal and he can accept compensation for handling the escrow.
Explanation:
An exclusive listing refers to the type of real estate listing agreement whereby a broker is chosen as the sole agent of the seller. It should be noted that the right to retain the property is held by the seller rand has no obligation to the broker.
Based on the information given, it can be infered that Bill's offer is ethical and legal and he can accept compensation for handling the escrow.
Gantner Company had the following department information about physical units and percentage of completion: Physical Units Work in process, May 1 (60%) 60000 Completed and transferred out 180000 Work in process, May 31 (40%) 50000 If all materials are added at the beginning of the production process, what is the total number of equivalent units for materials during May
Answer:
200,000 units by Weighted Average Cost Method
164,000 units by FIFO Method
Explanation:
1. Where Weighted Average Cost Method is used.
Assuming that Gantner Company uses the Weighted Average Cost Method, the total number of equivalent units for materials during May can be determined as follows :
Completed and transferred out (180000 x 100) 180,000
Ending Work In Process (50000 x 40%) 20,000
Total equivalent units for materials 200,000
1. FIFO Method is used.
Assuming that Gantner Company uses the FIFO Cost Method, the total number of equivalent units for materials during May can be determined as follows :
To Complete Opening Work in Process (60000 x 40%) 24,000
Completed and transferred out (180000 - 60,000) x 100% 120,000
Ending Work In Process (50000 x 40%) 20,000
Total equivalent units for materials 164,000
Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck
Answer: See explanation
Explanation:
The journal entry to record the purchase of the truck will be:
Dr Trucks $54641
Dr Discount on Notes Payable $25359
Cr Notes Payable $80000
Note:
Face value of Note = $80000
× PV factor = 1/1.10⁴ = 0.68301
Present value of Face value of Note = $54641
Fortuna Company is preparing its statement of cash flows. Cash disbursements during the year included:
Answer: $100,000
Explanation:
Financing activities are those that relate with how the company finances its operations and includes cashflows related to equity and long term liability.
The financing activities outflows here total:
= Payment of dividends to stockholders
= $100,000
The two other cashflows are considered investing activities.
The Cavendish Company is considering a project with an initial investment of $8 million that has an accounting rate of return of 25%. The project will generate an annual net cash flow of $1.75 million and annual net operating income of $2 million. What is the project's payback period?
Answer:
4 years and 2 months
Explanation:
The project's payback period is the length of time that the future cash flows take to equal the initial investment of the project.
Initial Investment = $8 million
Annual cash flows = $1.75 million
It will take 4 years and 2 months ($1 million /$8 million x 12) for annual cashflows to equal the Initial Investment of $8 million.
Which per unit cost does the slope of the total cost line represent? Group of answer choices Fixed Variable. Semivariable Step-variable
Answer: Variable cost
Explanation:
The slope of a regression line is meant to represent the change in the total variable or y, as a result of a change in the number of independent observations or x.
The cost that changes during production as a result of an increase in x which is the volume of products, is the variable cost so it is the slope of the total cost line,
Slope of total cost line:
y = mx + c
y = total cost
m = variable cost. m is also slope.
x = production volume
c = fixed cost
You are selling an asset. you can earn an interest rate of 7% per yer on your savings. You receive the following two (risk less) offers:
Offer 1: receive $400,000 today
Offer 2: Receive $500,000 in 4 years
a. Which offer should you choose?
b. At what interest rate would you be indifferent between the two offers?
Answer:
Option 1
5.737126344%
Explanation:
to determine which option i would prefer today, i would need to determine the present value of offer 2
Present value is the sum of discounted cash flows
[tex]\frac{500,000}{1.07^{4} }[/tex] = $381,447.61
I would prefer the first option because its present value is greater than that of option 2
The interest rate that would make me indifferent between either options would be the interest at which the present value of $500,000 in 4 years is $400,000
$400,000 = [tex]\frac{500,000}{(1 + x)^{4} }[/tex]
$400,000[tex](1 + x)^{4}[/tex] = $500,000
500,000 / 400,000= (1 + x)^{4}
1.25 = (1 + x)^{4}
[tex]1.25^{0.25}[/tex] = 1 + x
x = 5.737126344%
The Hi-Stakes Company has a number of importing and exporting transactions. Importing activities result in payables and exporting activities result in receivables. (LCU represents the local currency unit of the foreign entity.)
Required:
If the direct exchange rate increases, does the dollar weaken or strengthen relative to the other currency? If the indirect exchange rate increases, does the dollar weaken or strengthen relative to the other currency?
Answer:
The Hi-Stakes Company
a. If the direct exchange rate increases, the dollar strengthens relative to the other currency.
b. If the indirect exchange rate increases, the dollar also strengthens relative to the other currency.
Explanation:
When the exchange rate increases, it means that more of the other currency is required in order to embark on importing and exporting transactions. However, the increases will weaken the ability of the importing currency to afford the dollar-based goods, which have then being made more expensive.
implications of game theory
Answer:
Game Theory is a general mathematical analysis to investigate the strategic interactions among players. Game theorists attempt to provide precise descriptions of situations of conflicting interests in order to study the behavior that such a conflict would (or, in some cases, should) elicit from rational agents. Players are assumed to consider the position and perceptions of other players while forming their strategies. In our examples, we will assume that there are two players, and that each has two choices and the fact that the players are selfish (operate in their own best interests) and rational .
Limitations of Game Theory :
The biggest issue with game theory is that, like most other economic models, it relies on the assumption that people are rational actors that are self-interested and utility-maximizing. Of course, we are social beings who do cooperate and do care about the welfare of others, often at our own expense. Game theory cannot account for the fact that in some situations we may fall into a Nash equilibrium, and other times not, depending on the social context and who the players are.
Swifty Corporation purchased a truck at the beginning of 2020 for $109600. The truck is estimated to have a salvage value of $4100 and a useful life of 123000 miles. It was driven 18000 miles in 2020 and 26000 miles in 2021. What is the depreciation expense for 2020?
a. $37752
b. $22308
c. $16639
d. $15444
Answer:
Annual depreciation= $15,444
Explanation:
Giving the following information:
Purchase price= $109,600
Salvage value= $4,100
Useful life= 123,000
Miles driven 2020= 18,000
To calculate the depreciation expense, we will use the units-of-production method:
Annual depreciation= [(original cost - salvage value)/useful life of production in miles]*miles drive
Annual depreciation= [(109,600 - 4,100)/123,000]*18,000
Annual depreciation= 0.858*18,000
Annual depreciation= $15,444
Assuming that all entries have been posted, prepare correcting entries for each of the following errors.
a. The following entry was made to record the purchase of $774 in supplies on account:
Supplies 142 774
Cash 101 774
b. The following entry was made to record the payment of $475 in wages:
Rent Expense 521 475
Cash 101 475
c. The following entry was made to record a $396 payment to a supplier on account:
Supplies 142 196
Cash 101 196
Answer and Explanation:
The correcting journal entries are shown below:
a. Cash Dr $774
To account payable $774
(Being purchase of supplies on account is recorded)
b. Wages expense Dr $475
To rent expense $475
(Being wages expense is recorded)
c. Account payable $396
To Supplies $196
To cash $200
(being cash paid is recorded)
These 3 correcting entries should be recorded
MC Qu. 111 A company has an overhead application... A company has an overhead application rate of 124% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $23,000
Answer:
$28,520
Explanation:
Calculation to determine How much overhead would be allocated to a job if it required total labor costing $23,000
Using this formula
Overhead=Total Labor Cost x Overhead Application Rate
Let plug in the formula
Overhead=$23,000 x 1.24
Overhead= $28,520
Therefore How much overhead would be allocated to a job if it required total labor costing $23,000 will be $28,520
Which of the following statements is most correct concerning a project with normal cash flows (i.e., a cash outflow in Year 0 followed by cash inflows in all subsequent years)?
a) If the NPV of a project is positive then the payback period rule will always accept the project.
b) If the NPV of a project is negative, then the profitability index of the project will always be greater than one.
c) If the profitability index of a project is greater than one, then the IRR will always be less than the project’s cost of capital.
d) If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.
e) If the discount rate of a project is zero, then the project will always be accepted.
Answer: D. If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.
Explanation:
Net present value (NPV) refers to the difference that exist between the present value of the cash inflows and that of the cash outflows for a particular period of time.
The net present value is used in capital budgeting to determine if a projected investment or project will be profitable or not. For a project with normal cash flows, if the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.
Therefore, the correct option is D.
For each of the following scenarios, identify the number of firms present, the type of product, and the appropriate market model.
a. A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.
b. There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents view the quality of the tutoring at the different companies to be largely the same.
c. Only three airlines fly from San Francisco to Medford, Oregon. No new airline will enter this market, because there are not enough customers to share among four or more airlines without each one experiencing substantially higher average costs. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.
d. The government has granted a patent to a drug company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.
Answer:
a. large number of firms, they have differentiated products, and this is a monopolistic market model
b. large number of firms, they have standardized products, and this is a perfectly competitive market model
c. few number of firms, they have standardized products, and this is an oligopolistic market model
d. one number of firms, they have a single products, and this is a monopoly
Explanation:
a. This first question is a monopolistic competition. this is because it has the following characteristics:
It has large number of firms, the products here are differentiated, there is no entry cost and also no exit cost in the long run. Entereing the market is challenging
b. this is a perfect competition, the characteristics are large number of firms, the products are identical and the entry and exit in the market is easy
c. this market is an oligopoly. it has a few firms, the products can be identical or they can be differntiated, and it has barriers to entry from what we have seen here.
d. this market is a monopoly. the firm is a single one, and due to the patent there are no new entries for any other firm.
What is the amount of the risk premium on a U.S. Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent
Answer:
5.55%
Explanation:
risk premium = market rate of return - risk free rate
8.35 - 2.8 = 5.55
Target Corporation issues a 20-year $9,000,000 bond on January 1, 20xx with a 9% stated interest rated. Interest is paid semiannually on June 30 and December 31st. The bond will mature in twenty years. When Target Corporation retires the bond at the end of 20 years, what amount will they debit to the bonds payable account?
Answer:
Target Corporation
The amount that will be debited to the bonds payable account on December 31, 2020 will be:
= $9,000,000
Explanation:
a) Data and Calculations:
January 1, 20xx:
Face value of bonds issued = $9,000,000
Maturity period = 20 years
Stated interest rate = 9%
Interest payment = June 30 and December 31
Semiannual Interest Payment in dollars = $405,000 ($9,000,000 * 4.5%)
b) At maturity of the bonds after 20 years, Target Corporation will debit the Bonds Payable account and credit its Cash account with the sum of $9,000,000. On that date, the bond's carrying amount will be equal to the Bonds Payable account balance, all things remaining equal.
Assume that Jerome's available-for-sale portfolio had a total cost of $50,000 and a fair value of $46,000 on December 31 at the end of the first year it held the AFS securities . Make the necessary adjusting entry.
Answer:
Sep.15
Dr Investments in Available for sale securities 8900
Cr Cash 8900
30-Dec
Dr Other Comprehensive Income -(Unrealised loss-AFS) 4000
Cr Fair value adjustment-Stock 4000
31-Dec
Dr Fair value adjustment-Stock 1000
Cr Unrealised gain-Income 1000
Explanation:
Preparation of the journal entries
Books of Jerome Inc.
Sep.15
Dr Investments in Available for sale securities 8900
Cr Cash 8900
(Purchase of Notes of Topper Inc.)
30-Dec
Dr Other Comprehensive Income -(Unrealised loss-AFS) 4000
Cr Fair value adjustment-Stock 4000
(50000-46000)
31-Dec
Dr Fair value adjustment-Stock 1000
Cr Unrealised gain-Income 1000
(6000-5000)
(Unrealised holding period gain on Melina corporation stock hed as Trading securities)
Productivity is difficult to measure because precise units of measure are available, quality is consistent, and exogenous variables don't change. True False
Answer:
False
Explanation:
All of the statements being made are False. Productivity is measured by stats. For example, in any given month a certain number of products are produced by a fixed number of employees, the next month the same value is calculated and compared with the previous month. This lets you know if productivity is increasing or decreasing. The quality of anything depends on the time and effort being implemented in making something, if this changes then so does the quality. Exogenous variables are simply variables that are not affected by other variables in a given environment, this does not mean that they cannot change. Even though they are independent they can still change. For example, the weather is an exogenous variable but it can still change from Raining to Sunny.
The DEF partnership reported net income of $130,000 for the year ended December 31, 20X8. According to the partnership agreement, partnership profits and losses are to be distributed as follows in the following order:
D Â Â Â Â Â Â Â Â Â Â Â Â EÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â F
Salaries               $25,000            $20,000        $15,000
Bonus on net income        10%                       -----                -----
Remainder            60%            30%         10%
Required:
How should partnership net income for 2008 be allocated to D, E, and F?
Answer:
The DEF Partnership
Allocation of Partnership Net Income for 2008:
D E F Total
Net income $130,000
Salaries $25,000 $20,000 $15,000 (60,000)
Bonus on net income 13,000 ----- ----- (13,000)
Remainder 34,200 17,100 5,700 (57,000)
Total allocation $72,200 $37,100 $20,700 $130,000
Explanation:
a) Data and Calculations:
Net income for the year ended December 31, 2008 = $130,000
Order of distribution of partnership profits and losses:
D E F
Salaries $25,000 $20,000 $15,000
Bonus on net income 10% ----- -----
Remainder 60% 30% 10%
Bonus on net income = $13,000 ($130,000 * 10%)
Remainder after salaries and bonus = $57,000 ($130,000 - $73,000)
D = $34,200 ($57,000 * 60%)
E = $17,100 ($57,000 * 30%)
F = $5,700 ($57,000 * 10%)
The expenditure and income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:
1. Daesun pays Awesome Foods Market $1,100 to cater his daughter's engagement party. He's attracted by Awesome Foods Market's guarantee that he'll be happy with the catering, or he'll get his money back.
2. Awesome Foods Market pays JoAnn's Catering $950 to cater the party.
3. JoAnn's Catering buys plasticware worth $200 from Kostko.
Required:
Compute contributions to GDP, using the expenditure approach.
Answer:
Only the amount spent by Manuel would be in included in the calculation of GDP
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Net export = exports – imports
When exports exceed import there is a trade deficit and when import exceeds import, there is a trade surplus.
Consumption spending includes spending by households on goods and services. Consumption spending includes :
spending on durables - e.g. laptop
spending on nondurables - e.g. clothes, food
spending on services - e.g. payment of hospital bill
the purchase of a textbook by a student is an example of consumption spending on durable goods
Investment - It includes purchases of goods and services made by businesses in the production of goods and services
the airplane purchased by the airline would be used to provide services for airline customers. Also, the packing boxes bought by Amazon would be used in delivering goods to customers
Government spending - It includes government consumption expenditure and gross investment. The purchase of a new limousine for the president is an example of consumption expenditure
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
Blake Company purchased two identical inventory items. The item purchased first cost $34.00, and the item purchased second cost $35.00. Blake sold one of the items for $64.00. Which of the following statements is true?
A. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.
B. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.
C. Ending inventory will be lower if Blake uses weighted average than if FIFO were used.
D. Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used.
Answer:
c
Explanation:
LIFO means last in first out. It means that it is the last purchased inventory that is the first to be sold.
FIFO means first in, first out. It means that it is the first purchased inventory that is the first to be sold
Weighted average is the average cost of the inventories bought over a period
If FIFO is used, ending inventory would be $35.
If weighted average is used , ending inventory = (34 +35) / 2 = $34.50
Thus, ending inventory will be lower if Blake uses weighted average than if FIFO were used
Gross margin = gross profit / revenue
If FIFO was used . gross margin = (64 - 34) / 64 = 0.469
If LIFO was used . gross margin = (64 - 35) / 64 = 0.453
Gross margin will be lower if Blake uses LIFO than it would be if FIFO were used.
Moonbeam Company manufactures toasters. For the first 8-months of 2017, the company reported the following operating results while operating at 75% of plant capacity:
Sales (350,000 units) $4,375,000
Cost of goods sold 2,600,000
Gross profit 1,775,000
Operating expenses 840,000
Net income $935,000
Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed. In September, Moonbeam receives a special order for 21,600 toasters at $8.12 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping costs but no increase in fixed costs.
Required:
a. Prepare an incremental analysis for the special order.
b. Should Moonbeam accept the special order? Why or why not?
Answer:
Moonbeam Company
a. Incremental Analysis:
Sales revenue:
Units of toasters (21,600 at $8.12) $175,392
Variable costs (21,600 * $7.12) 153,792
Shipping costs 3,100
Total incremental costs $156,892
Incremental net income $18,500
b. Moonbeam should accept the special order. It has the required capacity to deliver the additional toasters. It will generate an incremental income of $18,500, which is better than nothing.
Explanation:
a) Data and Calculations:
Sales (350,000 units) $4,375,000
Cost of goods sold 2,600,000
Gross profit 1,775,000
Operating expenses 840,000
Net income $935,000
Operating capacity = 75%
Current sales = 350,000
Plant capacity = 466,667 units (350,000/75%)
Total Per Unit
Sales (350,000 units) $4,375,000 $12.50
Variable cost of goods sold = 1,820,000 ($2,600,000 * 70%)
Variable operating expense = 672,000 ($840,000 * 80%)
Total variable costs = $2,492,000 $7.12
Net income = $1,883,000
Special Order:
Incremental Sales revenue
Units of toasters (21,600 at $8.12) $175,392
Variable costs (21,600 * $7.12) 153,792
Shipping costs 3,100
Total incremental costs $156,892
Incremental net income $18,500
