Answer:
D. economic cost adds the opportunity cost of a firm using its own resources while accounting cost does not.
Explanation:
Accounting cost is equal to total explicit Cost. It is the actual cost expended in carrying out a project.
Economic cost is explicit cost plus opportunity cost.
Opportunity cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.
Economic cost is usually larger than accounting cost.
I hope my answer helps you
Stellar Plastics is analyzing a proposed project with annual depreciation of $19,500 and a tax rate of 34 percent. The company expects to sell 12,000 units, plus or minus 5 percent. The expected variable cost per unit is $3.20 plus or minus 4 percent, and the expected fixed costs are $30,000 plus of minus 2 percent. The sales price is estimated at $7.50 a unit, plus or minus 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000
Answer:
$20,226
Explanation:
expected sales = 11,400 - 12,000 - 12,600
expected sales price = $7.20 - $7.50 - $7.80
expected variable cost = $3.072 - $3.20 - $3.328
total fixed costs = $31,000
if you use an excel spreadsheet you can calculate all the different possible simulations and combine all the expected sales x 3 different price levels x 3 different variable costs and 1 fixed cost. Once you get all the 27 possible solutions, you just get the average.
I attached it because there is no room here.
Clyde operates a sole proprietorship using the cash method. This year Clyde made the following expenditures: $480 to U.S. Bank for 12 months of interest accruing on a business loan from September 1 of this year through August 31 of next year even though only $160 of interest accrued this year. $600 for 12 months of property insurance beginning on July 1 of this year. What is the maximum amount Clyde can deduct this year?
Answer:
$760
Explanation:
Clyde
Interest is been deducted proportionately and the interest of 4 months of this year will be deductible – ($480/12) × 4 months
= $160
12-month rule also applies to insurance and t the full amount of insurance is as well deductible.
Hence:
Maximum deduction
= $160 interest + $600 insurance
= $760
Therefore the maximum amount Clyde can deduct this year is $760
At the beginning of 2020, Vaughn Company acquired a mine for $1,965,400. Of this amount, $115,000 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately 11,010,000 units of ore appear to be in the mine. Vaughn incurred $195,500 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the mineral has been removed was $46,000. During 2020, 2,433,000 units of ore were extracted and 2,081,000 of these units were sold.
Compute the total amount of depletion for 2020.
Answer:
$462,270.00
Explanation:
The first task is to determine the depletion rate per unit of ore extracted from the mine.
depletion rate=total cost the mine/total units of ore extract
total cost of mine=acquisition cost-land value+development costs+removal cost
total cost of mine=$1,965,400-$115,000+$195,500+$46,000=$2,091,900.00
total units of ore extract is 11,010,000 units
depletion rate= 2,091,900.00/11,010,000=$0.19 per unit of ore
depletion amount in 2020=depletion rate*ore extracted in 2020=2,433,000*$0.19 =$462,270.00
Answer:
$408,903
Explanation:
Depletion is an estimated cost of a natural resource that is extracted. This resource is expensed as the extraction is made.
As per given data
Total Payment = $1,965,400
Land Value = $115,000
Value of Rights = $1,965,400 - $115,000 = $1,850,400
Estimated resources = 11,010,000 units
Resources extracted in the period = 2,433,000 units
Depletion expense is based on ratio of the amount of extraction in period to the total expected resource.
Depletion Expense = $1,850,400 x 2,433,000 / 11,010,000 units = $408,903
On 3/1/14 Fox Corp bought back 1,000 shares of their common stock for $15 per share. There were no shares in the treasury prior to that. On 5/23/14 they sold 200 of those shares for $17 each. On 6/19/14 they sold another 400 shares of those shares for $10 per share. Consider writing out all of your entries on scratch paper to assist you in answering questions 31 and 32. What will the remaining balance in the treasury stock account be after all of the above transactions have been recorded
Answer:
For question (31) $ 6000 (32) The net impact on retained earning is 1600 (Which is a negative
Explanation:
Question 31
No. Rate Value
Purchase of Treasury Stock 1000 15 15000
Less: Sold on 5/23/14 200 15 3000
Less: Sold on 6/19/14 400 15 6000
Net remaining value 6000
Note: to calculate the closing value of treasury stock, rate of selling stock need to be taken same as of date of purchase.
For question 31 the answer is $ 6000
Question 32
Impact on retained earning on first sale
No. Rate Value
Sale VALUE 200 17 3400
Less: Purchase of Treasury Stock 200 15 3000
Credit Retained earning 400
Impact on retained earning on second sale
No. Rate Value
Sale VALUE 400 10 4000
Less: Purchase of Treasury Stock 400 15 6000
Debit Retained earning -2000
Net Impact on retained earning 1600 (Negative i.e. Debit)
Therefore the remaining balance in the treasury stock account be after all of the above transactions have been recorded is $6000
Note: Kindly find an attached copy of the complete question to this solution
A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing.
The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge.
The following data are available:
Department Expected Use of Driver Cost
Processing 800 $1,500,000
Packaging 200,000 1,500,000
Testing 2,000 600,000
Production information for the two products is as follows:
Oil Sludge
Department Expected Use of Driver Expected Use of Driver
Processing 300 500
Packaging 120,000 80,000
Testing 1,600 400
The amount of overhead assigned to Sludge using ABC is
a. $1,800,000.
b. $1,657,500.
c. $1,942,500.
d. $1,380,000.
Answer:
its 1,800,000
because it the answer
Commercial banks are funded through which of the following?
At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
Answer:
estimated direct labor hours= 21,400 hours
Explanation:
Giving the following information:
Estimated overhead= $267,500.
Actual direct labor hours= 22,100 hours
Actual manufacturing overhead= $262,500
Overapplied overhead= $13,750
We need to reverse engineer the allocation process of overhead costs to calculate the estimated overhead hour:
Under/over applied overhead= real overhead - allocated overhead
-13,750= 262,500 - allocated overhead
276,250= allocated overhead
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
276,250= Estimated manufacturing overhead rate*22,100
$12.5= Estimated manufacturing overhead rate
Finally, we can calculate the estimated direct labor hours:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
12.5= 267,500/ estimated direct labor hours
estimated direct labor hours= 21,400 hours
Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $1.90 and total fixed costs are $10,000. The cat food can be sold as it is for $9.15 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,100 cost. The additional processing will yield 10,000 bags of Premium Green and 3,100 bags of Green Deluxe, which can be sold for $8.15 and $6.15 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be:
Answer:
Total gross profit =$ 50,565
Explanation:
Gross profit is the sales revenue less the cost of the goods sold. The cost of goods sold would include the variable cost of production, fixed cost and the further processing cost
$
Sales revenue (10,000×$8.15) + ( 3100 ×$6.15) = 100,565
Further processing cost (21,000)
Variable cost ( 10,000 ×$1.90) (19,000)
Fixed cost (10,000)
Gross profit 50,565
Equipment that cost $875,000 and had a book value of $390,000 was sold for $450,000. Data from the comparative balance sheets are: 12/31/18 12/31/17 Equipment $5,400,000 $4,875,000 Accumulated Depreciation 1,650,000 1,425,000 Equipment purchased during 2018 was:
a. $1,400,000.
b. $825,000.
c. $525,000.
d. $915,000.
Answer:
a. $1,400,000.
Explanation:
Find the attachment
Beresford Inc. purchased several investments in debt securities during 2020, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent. Held-to-Maturity Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Amortized Cost 12/31/2020 Amortized Cost 12/31/2021 ABC Co. Bonds $ 389,000 $ 414,000 $ 381,500 $ 374,000 Trading Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost DEF Co. Bonds $ 59,000 $ 70,000 $ 75,400 GEH Inc. Bonds $ 61,000 $ 91,000 $ 53,000 IJK Inc. Bonds $ 58,000 $ 52,500 $ 46,900 Available-for-Sale Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost LMN Co. Bonds $ 153,400 $ 166,700 $ 154,000 What balance sheet amount would Beresford report for the total of its investments in bonds at 12/31/2020
Answer:
Check the explanation
Explanation:
Kindly check the attached image below to see the step by step explanation to the question above.
Which of the following is the most likely negative consequence of excessive change in an organization? Group of answer choices Staff being asked to do too much Staff being restricted to a single activity The operation of the organization at less than capacity The establishment of a system for prioritizing projects
Answer:
Staff being asked to do too much.
Explanation:
Excessive change in an organization is defined as a process when organizations pursue several differing, unrelated and sometimes changes that are conflicting simultaneously. It can also be, when an organization involves in introducing new changes before previous changes are being accomplished.
Additionally, when staffs or employees perceives change as being excessive, they react in various ways. Some of their reactions to excessive change includes;
• They become overwhelmed.
• Lack of motivation.
• They're stressed out.
• Frustration and anger builds among them.
• Inadequacy, uncertainty
and incompetence.
The lower level staffs and middle managers are most likely to experience, the negative consequence of excessive change in an organization because they're being asked to do too much.
Brooke and John formed a partnership. Brooke received a 40% interest in partnership capital and profits in exchange for contributing land (basis of $30,000 and fair market value of $120,000). John received a 60% interest in partnership capital and profits in exchange for contributing $180,000 of cash. Three years after the contribution date, the land contributed by Brooke is sold by the partnership to a third party for $150,000. What gain must Brooke recognize on the land contribution when establishing the partnership
Answer:
$102,000
Explanation:
According to 26 US code Section 704(c) - Partner's distributive share :
Taxable gain to be recognized from sale = Sale value - ( Partner's share * Fair market value )
Brooke contributed the land, the gain realized before the land was contributed = $120,000 - $90,000 will be allocated entirely to her. She will also be allocated 40% of the gain after the contribution was made = ($150,000 - $120,000) x 40% = $30,000 x 40% = $12,000.
So the total gain recognized by Brooke will be $90,000 + $12,000 = $102,000.
Partnerships are pass through entities, the partners are taxed, not the partnership itself.
Department G had 2,400 units 25% completed at the beginning of the period, 13,300 units were completed during the period; 2,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period:
Work in process, beginning of period $32,200
Costs added during period:
Direct materials (12,900 units at $9) 116,100
Direct labor 75,000
Factory overhead 25,000
All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. What is the total cost of the units started and completed during the period (round unit cost calculations to four decimal places and round your final answer to the nearest dollar)?
a. $197,947
b. $181,306
c. $164,665
d. $98,100
Answer:
The total cost of the units started and completed during the period is $181,306. The right answer is b
Explanation:
In order to calculate the total cost of the units started and completed during the period we would have to calculate the Equivalent units as follows:
Equivalent units:
Whole units material conversion
Beginning units 2,400 0 1,800(75%)
Units started and complete 10,900 10,900 10,900
(13,300-2,400)
Total transferred 13,300 10,900 $ 12,700
Ending units 20,00 2,000 400(20%)
Equivalent units 15,300 12,900 13,100
Equivalent cost per unit:
Material conversion
Cost incurred this period $116,100 $100,000
÷ equivalent units ×12,900 ÷13,100
Cost per equivalent unit $9 $7.6336
Therefore, the total cost of the units started and completed during the period =10,900 units×($9+7.6336)
=$181,306
Bentley Enterprises uses process costing to control costs in the manufacture of Dust Sensors for the mining industry. The following information pertains to operations for November. (CMA Exam adapted) Units Work in process, November 1st 16,000 Started in production during November 100,000 Work in process, November 30th 24,000 The beginning inventory was 60% complete as to materials and 20% complete as to conversion costs. The ending inventory was 90% complete as to materials and 40% complete as to conversion costs. Costs pertaining to November are as follows: Beginning inventory: direct materials, $54,560; direct labor, $20,320; manufacturing overhead, $15,240. Costs incurred during the month: direct materials, $468,000; direct labor, $182,880; manufacturing overhead, $391,160. What is the equivalent unit cost for materials assuming Bentley uses first-in, first-out (FIFO) process costing?
Answer:
Material Cost per equivalent unit =$4.87
Explanation:
First in First out (FIFO)methods separates completed units into fully worked and opening inventory
Fully worked units: These represent units of inventory that were started in a current period and completed that same period. The fully worked units are calculated in order to separate the opening inventory from the the newly introduced when accounting for completed units under the FIFO.
For Bentley , fully worked units is
Fully worked = Newly introduced - closing work in progress
= 100,000- 24,000 = 76,000 .
Opening inventory = 16,000
Item Units Equivalent Units
Opening inventory 16,000 × 40%= 9,600
Completed unit 76,000 × 100% = 480,000
Closing inventory 24,000 × 90% = 21,600
Total equivalent units 107,200
Cost per equivalent unit = Total cost/ equivalent inits
= 54560 +468,000/ 107,200 = $4.87
Material Cost per equivalent unit =$4.87
The equivalent unit cost for materials assuming Bentley uses first-in and first-out (FIFO) process costing:
For Bentley , fully worked units is
Fully worked = Newly introduced - closing work in progressFully worked= 100,000- 24,000 = 76,000 .Opening inventory = 16,000
Item Units Equivalent Units
Opening inventory 16,000 × 40%= 9,600
Completed unit 76,000 × 100% = 480,000
Closing inventory 24,000 × 90% = 21,600
Total equivalent units 107,200
Cost per equivalent unit = Total cost/ equivalent inits
Cost per equivalent unit= 54560 +468,000/ 107,200 = $4.87
The Material Cost per equivalent unit =$4.87.
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Consider two independent firms, BU1 and BU2, which transact with each other through spot market transactions in a competitive market. In a typical year, BU1 incurs total costs of $2 million in producing goods that BU2 buys. BU2 would be willing to pay up to $7.5 million for these goods, but because of the competitive market, ends up paying $5 million. What is the value captured by BU1 from these transactions?
Answer:
Value captured by BU1 = $5.5 million
Explanation:
Given:
Two firm = BU1 , BU2
BU1 cost of production = $2 million
BU2 will able to pay up-to = $7.5 million
BU2 will pay = $5 million:
Find:
Value captured by BU1 = ?
Computation:
⇒ Value captured by BU1 = BU2 will able to pay up-to - BU1 cost of production
⇒ Value captured by BU1 = $7.5 million - $2 million
⇒ Value captured by BU1 = $5.5 million
Based on the information given the value captured by BU1 from these transactions is $3 million.
The value captured by the seller (BU1)
Seller value =Value BU1 is willing to sell -Value at which he sold
Where:
Value BU1 is willing to sell=$5 million
Value at which he sold=$2 million
Let plug in the formula
Seller value=$5 million-$2 million
Seller value= $3 million
Inconclusion the value captured by BU1 from these transactions is $3 million.
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Vaughn Manufacturing expects to purchase $180000 of materials in July and $170000 of materials in August. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. How much will August's cash disbursements for materials purchases be?
Answer:
The August's cash disbursements for materials purchases would be
$172,500.00 for Vaughn Manufacturing
Explanation:
The cash disbursements in the month of August consist of the three-fourth cost of the August purchases and the one-fourth of the July purchases since the 3/4 of the cost of materials purchased is paid in the same month as purchases and the balance of 1/4 of purchase cost in the succeeding month
Cash disbursements in August=($170,000*3/4)+($180,000*1/4)=$127500 +$45,000=$172,500.00
Please help ASAP giving BRAINLIEST , Did I get this correct?
Answer:
Yes you are correct on this researched it
Answer:
YEAH:)
Explanation:
Topic: The Consumer and Business Market To increase revenue, many businesses, such as gift basket, insurance, tax preparation, food, and entertainment businesses, have targeted consumer and business markets. However, the decision-making process is a bit different for each market. Checklist: First, briefly describe the similarities and differences in the decision-making process between the business-to-business (B2B) and business-to-consumer (B2C) groups. Next, choose a business that predominantly targets the consumer market. Explain how they can reposition themselves to increase their sales to the business market using the business decision-making process.
Answer:
Check the explanation
Explanation:
B2B decisions are made between business entities (business and wholesaler, wholesaler and retailer) while B2C decisions are made between business and individuals (business and individual customers). Decision Making Units (DMU) is common in B2B and B2C decisions.
In a B2B, the key DMU includes economic buyer, infrastructure buyer and the user buyer. The economic buyer is the person buying a product, infrastructure buyer is the person providing infrastructure to make the purchase happen and the user buyer is the person supplying the product.
In the case of a decision-making process in a B2C, the DMU is a group of people making the decisions on the purchase of goods. B2C decision making consists of a buying center with users, buyers, influencers, gatekeepers and deciders.
The buying center is the key DMU in a B2C segment. The initiators in the buying center offer suggestions in a product purchase. The influencers provide their opinions in a product purchase. The buyers are the persons responsible for the entire contract. The gatekeepers control the information flow. Deciders take the final decision on a purchase. End users purchase the final product and use the item.
Consider the restaurant or fast food business that predominantly targets the corporate employees. In this case, a B2B decision-making process can be used to get more customers and improve their sales.
The economic buyer in this case is the employee of the corporate, the infrastructure buyer is the corporate entity and the user buyer is the fast food company supplying the food item. In this manner, a network with various corporate entities in the local area could improve the sales of the fast food company.
Similarly, a B2C decision-making process can be used to improve the sales by directly selling to the employees of the corporate and other people requiring fast food delivery at home through a mobile app.
In the decision-making process of B2C, the buyers are the fast food company, influencers may the persons including friends, family members and other entities, end users are the persons purchasing food through mobile app and gatekeepers are the persons responsible for maintaining the mobile app.
You are an experienced small business owner who would like to become a franchisee of Quick Burger, a nationwide franchise of fast food restaurants. There are some Quick Burger restaurants in your area, but not so many that another franchise would be profitable. Before joining the franchise, you want to make sure that the essential terms are clear to both parties. Discuss potential issues you would need to resolve before entering into a franchise contract with Quick Burger.
Answer:
In the situation in question, there are various things that need to be settled until the license contract is signed into. The first problem is the clarification on the territorial features of the company when separate branches of the very same network run which that create friction.
The second problem is the range, vocabulary, and style of franchise marketing strategies as heavy marketing, may damage one another's franchise consumers, and may harm the company in general. The third problem is the localisation-based exchange of information with both the franchise.
Whether it be the unified business center or customers that decide. Not considering it, could hurt the new franchisor. The fourth problem seems to be the exchange with other franchises of company data or data from my current customer base to support them.
JB Instruments is analyzing a proposed project. The company expects to sell 1,600 units, ±3 percent. The expected variable cost per unit is $220 and the expected fixed costs are $438,000. Cost estimates are considered accurate within a ±2 percent range. The depreciation expense is $64,000. The sales price is estimated at $647 per unit, ±2 percent. What is the sales revenue under the worst-case scenario?
Answer:
$984,061.12
Explanation:
The computation of sales revenue under the worst-case scenario is shown below:-
Sales revenue under the worst-case scenario = Quantity sold × Price
= (1,600 - 1,600 × 3%) × ($647 - $647 × 2%)
= (1,600 - 48) × ($647 - 12.94)
= 1,552 × 634.06
= $984,061.12
Therefore for computing the sales revenue under the worst-case scenario we simply applied the above formula.
Runner Sprintz, a particular brand of shoes, has its own website, myrunnersprintz that welcomes consumers to "the Runner Sprintz Century," invites readers to post their Runner Sprintz stories, and offers a wide variety of shoes for direct purchase. The site even allows customers to individually design their own shoes and share them among their circles on the website. Which of the following best describes myrunnersprintz? A. corporate website B. blog C. Web directory D. digital catalog E. branded community website
Answer:
E. branded community website
Explanation:
-Corporate website is a website that is used to provide information about a company or brand.
-Blog is a site in which you can publish informal content in the form of articles that are called posts.
-Web directory is a list of sites published online.
-Digital catalog is an online publication that shows the products or services offered by a business.
-Branded community website is a website created by a company in which it tries to connect with the group of people that are fans of the brand and provide a space that is controlled by the company in which they can share ideas and give feedback.
According to this, the answer is that the option that best describes myrunnersprintz is branded community website.
8-27 Basic Flexible Budget The budgeted prices for materials and direct labor per unit of fi nished product are $8 and $7, respectively. The production manager is delighted about the following data: Static Budget Actual Costs Variance Direct materials $59,200 $49,900 $9,300 F Direct labor 51,800 39,200 12,600 F Is the manager’s happiness justifi ed? Prepare a report that might provide a more detailed explanation of why the static budget was not achieved. Good output was 5,300 units.
Answer:
Basic Flexible Budget
Flexible Budget:
Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
September 5
Flexible Actual Variance
Costs: 5,300 units 5,300 units 0
Direct Materials $42,400 $49,900 $7,500 U
Direct Labor $ 37,100 $39,200 $2,100 U
Total Variable costs $79,500 $89,100 $9,600 U
Explanation:
Using the good output and a flexible budget, the static budget was not achieved favorably as depicted.
A flexible budget varies the budgeted units to agree with the volume of activity. This produces a different result from the static budget, which does not vary the budgeted units according to the volume of activity.
A flexible budget is preferable as it reflects the correct performance given the activity level or volume of production or sales.
Assume that an economy is initially in long-run equilibrium. Explain the short-run effect of monetary policy that causes an increase in interest rates. As a result of higher interest rates, the A. long-run aggregate supply curve will shift left. B. aggregate demand curve will shift left. C. short-run aggregate supply curve will shift left. D. aggregate demand curve will shift right. The new equilibrium will be A. where the original aggregate demand curve intersects the original short-run aggregate supply curve. B. where the new aggregate demand curve intersects the original short-run aggregate supply curve. C. where the new aggregate demand curve intersects the original aggregate demand curve.
Answer:
As a result of higher interest rates, the
B. aggregate demand curve will shift left.The new equilibrium will be
B. where the new aggregate demand curve intersects the original short-run aggregate supply curve.Explanation:
A contractionary monetary policy will increase the interest rates, lowering investment and consumption. This will result in a leftward shift of the aggregate demand curve.
The new equilibrium (E1) will be at the point where the new aggregate demand curve (AD1) intersects the original short run aggregate supply curve (SRAS) and the long run aggregate supply curve (LRAS).
NorthEast Towers Company produces a single product. For the most recent year, the company's net operating income computed by the absorption costing method was $17,450, and its net operating income computed by the variable costing method was $15,259. The company's unit product cost was $45 under variable costing and $52 under absorption costing. If the ending inventory consisted of 948 units, the beginning inventory must have been:
Answer:
1,261 units
Explanation:
To determine the Units of Beginning Inventory, prepare a Reconciliation of Absorption Costing Profit to Variable Costing Profit.
Reconciliation of Absorption Costing Profit to Variable Costing Profit
Absorption Costing Net Income $17,450
Add Fixed Costs in Opening Stock (948×($52-$45)) $ 6,636
Less Fixed Costs in Closing Stock Balancing Figure ($8,827)
Variable Costing Net Income $15,259
Units of Beginning Inventory = $8,827 / ($52-$45)
= 1,261
Splash World is considering purchasing a water park in Atlanta, Georgia, for $ 1,870,000 . The new facility will generate annual net cash inflows of $ 472,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of 12 % on investments of this nature.
Requirements
1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment.
2. Recommend whether the company should invest in this project.
Answer:
1)
Payback period = Initial investment / Annul cash flow
Payback period = 1,880,000 / 480,000
Payback period = 3.92 years
2)
Accounting rate of return = Average cash flow / ( initial investment - book value) / 2
Accounting rate of return = 480,000 / ( 1,880,000 - 0)/2
Accounting rate of return = 0.5106 or 51.06%
3)
NPV = Present value of cash inflows - present value of cash outflows
NPV = 480,000 * 4.968 - 1,880,000
NPV = $504,640
4)
IRR is the rate of return that makes NPV equal to 0
NPV = Annuity * [ 1 - 1 / ( 1 + R)n] / R - initial investment
NPV = 480,000 * [ 1 - 1 / ( 1 + R)8] / R - 1,880,000
Using trial and error method, i.e, after using various values for R, let's try R as 19.32%
NPV = 480,000 * [ 1 - 1 / ( 1 + 0.1932)8] / 0.1932 - 1,880,000
NPV = 0
Therefore, IRR is 19.32%
Splash world should invest in the project as it has a positive NPV and and IRR greater than cost of capital
On April 2, Granger Sales decides to establish a $290 petty cash fund to relieve the burden on Accounting.
Required:
a. Journalize the establishment of the fund
b. On April 10, the petty cash fund has receipts for mail and postage of $62, contributions, and donations of $33, meals and entertainment of $114, and $77 in the ending cash balance. Journalize the replenishment of the fund
c. On April 11, Granger Sales decides to increase petty cash to $430. Journalize this event
Answer and Explanation:
The journal entries are shown below:
On Apr 2
Petty cash $290
To Cash $290
(Being the establishment of the petty cash fund is recorded)
For recording this we debited petty cash as it increased the cash and credited the cash as it reduced the assets
On Apr 10
Mail & Postage $62
Contributions and Donations $33
Meals & entertainment $114
Cash Short and Over $4 ($290 - $62 - $33 - $114 - $77)
To Cash $213
(Being the replenishment of the fund is recorded)
For recording this, we debited the mail & postage, contributions & donations, meals & entertainment as it increased the expenses and credited the cash as it reduced the assets and the balancing figure is debited to cash short and over
On Apr 11
Petty Cash $140 ($430 - $290)
To Cash $75
For recording this we debited petty cash as it increased the cash and credited the cash as it reduced the assets
Distinguishing between controllable and noncontrollable costs on a performance report may result in: a decrease in goal congruent behavior by managers. an increase in the effectiveness of a cost management system. an increase in feelings of blame by managers. an increase in the effectiveness of a cost management system and an increase in the quality of performance information. an increase in the quality of performance information.
Answer: an increase in the effectiveness of a cost management system and an increase in the quality of performance information.
Explanation:
Controllable costs this are the cost over which a company can control. Examples of this cost include marketing budgets, and labor costs.
Why non-controllable costs are those cost that a company cannot change or control, examples of this cost are rent , and insurance. This are usually noticeable by an increase in the effectiveness of a cost management system, and an increase in the quality of performance information.
Danielle Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 8,200 units, but its actual level of activity was 8,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:
Data used in budgeting
Fixed element per month Variable element per unit
Revenue $34.20
Direct labor $0 $6.20
Direct materials 0 13.80
Manufacturing overhead 37,000 1.70
Total expenses $62,500 $21.90
Selling and administrative expenses 25,500 0.20
Actual results for May:
Revenue $228,900
Direct labor $41,130
Direct materials $93,235
Manufacturing overhead $43,500
Selling and administrative expenses $30,470
The direct materials in the flexible budget for May would be closest to:________.
a. $89,735.
b. $92,230.
c. $90,420.
d. $91,020.
Answer:
$113,850
Explanation:
The computation of the direct material in the flexible budget is shown below:
= Actual level of activity × direct material per unit
= 8,250 units × $13.80
= $113,850
By multiplying the actual level of activity with the direct material per unit we can get the direct material in the flexible budget and the same is shown above
This is the answer but the same is not provided in the given options
Dexter Industries purchased packaging equipment on January 8 for $116,600. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,600. The equipment was used for 8,700 hours during Year 1, 7,380 hours in Year 2, and 3,920 hours in Year 3. Required: 1. Determine the amount of depreciation expense for the three years ended December 31 by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the three years by each method. (Note: For STRAIGHT-LINE ONLY, round the first two years to the nearest whole dollar, then round the third year as necessary. For DECLINING BALANCE ONLY, round the multiplier to five decimal places. Then round the answer for each year to the nearest whole dollar.) 2. What method yields the highest depreciation expense for Year 1
Answer:
Straight-line method: $36,667 yearly depreciation expense for 3 years. Unit-of-production method: Year 1 - $47,850, Year 2 - $40,590, Year 3 - $21,560Double-declining method: Year 1 - $77,737, Year 2 - $25,910, Year 3 - $6,353Total for 3 years is $110,000 for all the depreciation methods.
Explanation:
(A) Under straight-line method, depreciation expense is (cost - residual value) / Estimated useful life = ($116,600 - $6,600) / 3 years = $36,667 yearly depreciation expense.
Accumulated depreciation for 3 years is $36,667 x 3 years is $110,000.
(B) The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 8,700 hours = $47,850
At Year 2, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 7,380 hours = $40,590
At Year 3, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 3,920 hours = $21,560
Accumulated depreciation for 3 years is $47,850 +$40,590 + $21,560 = $110,000.
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Year 1.
(C) The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/3 years = 33.33%, then 33.33% multiplied by 2 to give 66.67% or 2/3
At Year 1, 66.67% X $116,600 = $77,737
At Year 2, 66.67% X $38,863 ($116,600 - $77,737) = $25,910
At Year 3, 66.67% X $12,953 ($38,863 - $25,910) = $8,636. This depreciation will decrease the book value of the asset below its salvage value $12,953 - $8,636 = $4,317 < $6,600. Depreciation will only be allowed up to the point where the book value = salvage value. Consequently the depreciation for Year 3 will be $6,353.
Accumulated depreciation for 3 years is $77,737 + $25,910 + $6,353 = $110,000.
On March 1, 2022, Wildhorse Company acquired real estate, on which it planned to construct a small office building, by paying $98,000 in cash. An old warehouse on the property was demolished at a cost of $11,000; the salvaged materials were sold for $3,100. Additional expenditures before construction began included $2,000 attorney's fee for work concerning the land purchase, $6,300 real estate broker's fee, $10,800 architect's fee, and $18,200 to put in driveways and a parking lot.
Determine the amount to be reported as the cost of the land.
Answer:
The amount to be reported as the cost of the land is $ 114,200
Explanation:
Cash paid for the land = $ 98,000
Net cost of demolishing old ware house = $ 11,000 - $ 3,100 = $ 7,900
Attorney's fee = $2,000
Real estate broker's fee = $ 6,300
Total cost of the land = Cash paid for the land + Net cost of demolishing old ware house + Attorney's fee + Real estate broker's fee
= $98,000 + $ 7,900 + $2,000 + $ 6,300
= $ 114,200
