Answer:
a. Raw Material Purchases (Dr.) Nkr200,000
Accounts Payable (Cr.) Nkr200,000
b. Work in process (Dr.) Nkr185,000
Raw material (Cr.) Nkr185,000
c. Manufacturing Overhead (Dr.) Nkr63,000
Selling and admin Overheads (Dr.) Nkr7,000
Utility expense (Cr.) Nkr70,000
d. Direct Labor wages (Dr.) Nkr230,000
Indirect Labor wages (Dr.) Nkr90,000
Selling and admin Salaries (Dr.) Nkr110,000
Salaries Expense (Cr.) Nkr 430,000
e. Maintenance expense (Dr.) Nkr54,000
Cash (Cr.) Nkr54,000
f. Advertising expense (Dr.) Nkr36,000
Cash (Cr.) Nkr36,000
g. Depreciation Expense (Dr.) Nkr95,000
Accumulated depreciation (Cr.) Nkr95,000
h. Rent Expense (Dr.) Nkr20,000
Cash (Cr.) Nkr20,000
Explanation:
i. No entry
j. Finished goods (Dr.) Nkr770,000
Cost of goods manufactured (Cr.) Nkr770,000
k. Cash (Dr.) Nkr1,200,000
Sales (Cr.) Nkr1,200,000
Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.60 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a return of 13.80 percent on your equity investments
Answer:
$18.84
Explanation:
The amount i would be willing to pay is the present value of the dividend payment
Present value = [tex]\frac{dividend}{r}[/tex]
r = interest rate
2.6 / 0.1380 = $18.84
BUS 320 Cal Lury owes $21,000 now. A lender will carry the debt for five more years at 6 percent interest. That is, in this particular case, the amount owed will go up by 6 percent per year for five years. The lender then will require that Cal pay off the loan over the next 13 years at 9 percent interest. What will his annual payment be
Answer:
$3,753.59
Explanation:
Value of debt at end of 5 years = $21,000 * (1 + 6%)^5
Value of debt at end of 5 years = $21,000 * 1.3382255776
Value of debt at end of 5 years = $28102.7371296
Value of debt at end of 5 years = $28,102.74
Let x be the annual payments:
x*[1 - (1 + 9%)^-13] / 9% = $28,102.74
x * [1-0.32617864688] / 0.09 = $28,102.74
x * 7.486904 = $28,102.74
x = $28,102.74 / 7.486904
x = 3753.58626
x = $3,753.59
A proper segregation of duties requires that an individual A. Authorizing a transaction records it. B. Maintaining custody of an asset be entitled to access the accounting records for the asset. C. Recording a transaction not compare the accounting record of the asset with the asset itself. D. Authorizing a transaction maintain custody of the asset that resulted from the transaction.
Answer:
C. Recording a transaction not compare the accounting record of the asset with the asset itself.
Explanation:
Financial accounting is an accounting technique used for analyzing, summarizing and reporting of financial transactions like sales costs, purchase costs, account payables and receivables of an organization using standard financial guidelines such as Generally Accepted Accounting Principles (GAAP) and financial accounting standards board (FASB).
Thus, it is a field of accounting involving specific processes such as recording, summarizing, analysis and reporting of financial transactions with respect to business operations over a specific period of time. Financial experts or accountant uses either the cash basis or accrual basis of accounting.
Segregation of duties helps to ensure that no single person has a sole control over the life cycle or span of a particular transaction. Thus, it is typically used for internal controls and risk management in businesses.
Hence, a proper segregation of duties requires that an individual that is saddled with the responsibility of recording a transaction not to compare the accounting record of the asset with the asset itself, instead it would be compared by another as an internal control measure.
What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 12% of par, and a current market price of (a) $56.00, (b) $76.00, (c) $116.00, and (d) $133.00? Round your answers to two decimal places. %
[tex] \text{Preferred share par value = $30} [/tex]
[tex] \text{Dividend per share (Dp) = $10 ($100×10%)} [/tex]
Required :[tex] \text{Normal rate of return (rp)} [/tex]
Formula :[tex] \text{rp =} \frac{Dp}{Vp} [/tex]
Where,
[tex] \text{Vp = price of preferred share} [/tex]
[tex] \text{Dp = dividend per share} [/tex]
[tex] \text{Rp = normal rate of return of preferred share} [/tex]
Solve for nomial rate of return (rp) :Refer The AttachmentWhich of the following is not true of liquidity or marketability risk or discount? It is measurable. The magnitude of the discount or risk is inversely related to the size of the investor’s equity ownership in the business. The magnitude of the discount or risk is directly related to the size of the investor’s equity ownership in the business. It is important to adjust the discount rate for liquidity risk. It is believed to have declined in recent years
Answer:
The magnitude of the discount or risk is directly related to the size of the investor’s equity ownership in the business.
Explanation:
The following statements should be considered true with respect to the liquidity or marketability risk
a. It can be measurable
b. The discount or risk magnitude should be inversely related
c. It is considered to be important for adjusting the discount rate
d. It can be fall in the current years
So, the remaining statement should be the answer
Wieters Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows:
Activity Activity Overhead $ Cost Driver Cost Driver Quantity
Machine setup $200,000 # of setups 800
Inspection 120,000 # of quality tests 400
Materials receiving 252,000 # of purchase orders 1,800
The budgeted data for smartphone case production are as follows.
Direct materials $2.50 per unit
Direct labor $0.54 per unit
Number of setups 92
Number of quality tests 400
Number of purchase orders 50
Production 15,000 units
Required
a. Calculate the activity rate for each cost pool.
b. Calculate the activity-based unit cost of the smartphone case.
Answer:
Wieters Industries
a. Activity Rates:
Machine setup = $250
Inspection = 300
Materials receiving 140
b. The activity-based unit cost of the smartphone case is:
= $13.04
Explanation:
a) Data and Calculations:
Activity Activity Overhead $ Cost Driver Cost Driver Quantity
Machine setup $200,000 # of setups 800
Inspection 120,000 # of quality tests 400
Materials receiving 252,000 # of purchase orders 1,800
Total overhead costs $572,000
Activity Rates:
Machine setup = $250 ($200,000/800)
Inspection = 300 ($120,000/400)
Materials receiving 140 ($252,000/1,800)
Budgeted data for smartphone case production:
Direct materials $2.50 per unit
Direct labor $0.54 per unit
Number of setups 92
Number of quality tests 400
Number of purchase orders 50
Production 15,000 units
Overhead Applied to Smartphone Case:
Number of setups 92 * $250 = $ 23,000
Number of quality tests 400 * $300 = 120,000
Number of purchase orders 50 * $140 = 7,000
Total overhead applied = $150,000
Overhead per unit = $10 ($150,000/15,000)
Unit Cost of Smartphone Case:
Direct materials per unit $2.50
Direct labor per unit $0.54
Overhead per unit $10.00
Total unit cost = $13.04
The demand for
goods increases with a decrease in income, whereas
are goods that cannot be bought or sold.
Answer:
A normal good is a good that experiences an increase in its demand due to a rise in consumers' income. Normal goods include food ...
On January 1, Pharoah Company had 87000 shares of $10 par value common stock outstanding. On May 7, the company declared a 5% stock dividend to stockholders of record on May 21. Market value of the stock was $16 on May 7. The stock was distributed on May 24. The entry to record the transaction of May 24 would include a
Answer: credit to Common Stock Dividends Distributable for $43500
Explanation:
Based on the information given in the question, the entry to record the transaction of May 24 goes thus:
Debit Stock Dividend = 87000 × 5% × $16 = $69600
Credit To Common Stock Dividend Distributable = 87000 × 5% × $10 = $43500
Credit To Paid in capital in excess of Par - Common Stock = $69600 - $43500 = $26100
Mideast Airlines purchased a 777 aircraft on January 1, 2020 at a cost of
$40,000,000. The estimated useful life of the aircraft is 20 years, with an
estimated salvage value of $6,000,000. What is the accumulated
depreciation and book value at December 31, 2022, using the straight-line
method
Answer:
3,400,000 accumulated depreciation, 36,600,000 book value
Explanation:
Cost - salvage = amount to be depreciated
40,000,000-6,000,000=34,000,000 amount to be deprecated
34,000,000/20 years =1,700,000 depreciation per year
1,700,000x2-3,400,000 accumulated depreciation after 2 years
40,000,000-3,400,000=36,600,000 book value
Cyberphone, a manufacturer of cell phone accessories, ended the current year with annual sales (at cost) of $ million. During the year, the inventory of accessories turned over times. For the next year, Cyberphone plans to increase annual sales (at cost) by percent. a. What is the increase in the average aggregate inventory value required if Cyberphone maintains the same inventory turnover during the next year? $ nothing. (Enter your response as an integer.)
Answer:
sorry po
Explanation:
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The Winter Wear Company has expected earnings before interest and taxes of $3,800, an unlevered cost of capital of 15.4 percent and a tax rate of 22 percent. The company also has $2,600 of debt with a coupon rate of 5.7 percent. The debt is selling at par value. What is the value of this firm
Answer:
$ 19,819
Explanation:
Calculation to determine the value of this firm
Using this formula
Firm Value = [ [ Earnings before interest and tax x (1 - tax rate) ] / Unlevered cost of capital ] + Amount of debt x tax rate
Let plug in the formula
Firm value= [ [ $ 3,800 x (1 - 0.22) ] / 0.154 ] + $ 2,600 x 22%
Firm value=[($3,800×.78)/0.154]+$572
Firm value=($2,964/0.154)+$572
Firm value=$19,246.75+$572
Firm value=$19,818.76
Firm value= $ 19,819 Approximately
Therefore the value of this firm will be $ 19,819
You are a certified fraud examiner, and a local community group, the Silver Years Senior Squad, has requested that you give a presentation about consumer fraud. They want to hear about examples of recent scams that have happened to people and how they can avoid being scammed. What advice you would give to the Silver Years Senior Squad to help them avoid becoming a victim of a telemarketing fraudster?
Answer:
The answer is below
Explanation:
To avoid becoming a victim of a telemarketing fraudster, here some of the necessary things you should not and eventually do:
1. Usually telemarketing fraudsters require the victim involvement or participation, always say NO when you suspect a fraud
2. Old people are more vulnerable to telemarketing fraud, hence, the elderly ones need to be more careful and watch over if necessary.
3. To guide against telemarketing fraud effectively it is to carry out fast and direct reporting of any telemarketing calls suspected to be fraudulent to the Federal Trade Commission
4. Be alert and understand that fraudsters are very manipulative and focus on greed, fear, excitement, and gullibility.
5. Give them none of your information, including those you think is not sensitive or vital, you might never know how ell they could use that information
Statement True/False Explanation 1 True Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. All that is necessary is that each country have a comparative advantage in some good. 2 False No one can have a comparative advantage in everything. Comparative advantage reflects the opportunity cost of one good or activity in terms of another. If you have a comparative advantage in one thing, you must have a comparative disadvantage in something else. 3 False It is not true that if a trade is good for one person, it cannot be good for the other one. Trades can and do benefit both sides when based on comparative advantage. If both sides did not benefit, trades would never occur. 4 False To benefit both parties, the trade price must lie between the two opportunity costs. 5 False Trade that makes the country better off can harm certain individuals in the country. For example, suppose a country has a comparative advantage in producing wheat and a comparative disadvantage in producing cars. Exporting wheat and importing cars will benefit the nation as a whole, as it will be able to consume more of both goods. However, the introduction of trade will likely be harmful to domestic auto workers and manufacturers.
Answer:
1 - True
2 - False
3 - False
4 - False
5 - False
Explanation:
Two countries can gain from the trade if one has comparative advantage in a certain good and other has comparative advantage in other good. The trade will always occur when both parties involved in the trade benefits from it. It is not necessary that if a country has comparative advantage in certain good then it will have comparative disadvantage in other good.
what is the future value of ordinary annuity makes 2000 every month 10 years interest rate is 7% g
Answer:
The future value of the ordinary annuity is:
= $346,169.61.
Explanation:
a) Data and Calculations:
Ordinary annuity receipt/payment = $2,000
Payment is made monthly for 10 years (120 months)
Interest rate = 7%
From an online financial calculator, the future value is:
N (# of periods) 120
I/Y (Interest per year) 7
PV (Present Value) 0
PMT (Periodic Payment) 2000
Results
FV = $346,169.61
Sum of all periodic payments $240,000.00
Total Interest $106,169.61
The first step in the decision-making process is to
Answer:
First step in decision- making process is to identify problem. The first step in making the right decision is recognizing the problem or opportunity and deciding to address it. Determine why this decision will make a difference to your customers or fellow employees.
Explanation:
Assume the prices of product X and Y are $2.00 and $1.00, respectively, and that Mr. Mo has $100 to spend. Assume a normal indifference curve.
a. What is the slope of Mr. Mo budget constraint.
b. Write out Mr.Mo equation to his budget constraint.
c. Assume that Mr. Mo needs 10 units of product X to maximize utility. What combination of X and Y Will Mr. Chen purchase?
d. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c,
e. Draw the budget constraint graph and indifference curve before the change and after the change in the price of Y.
Answer:
Explanation:
The equation of a line is given by:
y = mx + b; where m is the slope of the line, b is the y intercept.
Given that the price of product X is $2 while the price of Y is $1 and Mr. Mo has $100 to spend. Therefore:
a) 2x + y = 100
y = -2x + 100
The slope of Mr. Mo budget constraint is -2
b) 2x + y = 100
c) If x = 10, to find the combination, substitute x = 10 and find y:
2x + y = 100
2(10) + y = 100
y + 20 = 100
y = 80
That is 10 units of x and 80 units of Y
d) 2x + 2y = 100
2y = -2x + 100
y = -x + 50
The slope of Mr. Mo budget constraint is -1
The budget constraint is 2x + 2y = 100
If x = 10, to find the combination, substitute x = 10 and find y:
2x + 2y = 100
2(10) + 2y = 100
2y + 20 = 100
2y = 80
y = 40
That is 10 units of x and 40 units of Y
e) The graph was drawn using geogebra online graphing calculator and it is attached
¿Cuáles son los tramites para que una empresa se vuelva persona jurídica?
Answer: Crea una LLC o Corporación. ...
Registre su nombre comercial. ...
Solicite un número de identificación fiscal federal. ...
Determine si necesita un número de identificación fiscal estatal. ...
Obtenga permisos y licencias comerciales. ...
Proteja su negocio con un seguro. ...
Abra una cuenta bancaria comercial.
Explanation:
Alfred derives utility from consuming iced tea and lemonade. For the bundle he currently consumes, the marginal utility he receives from iced tea is 16 utils, and the marginal utility he receives from lemonade is 8 utils. Instead of consuming this bundle, Alfred should:______.
a. buy more iced tea and less lemonade.b. buy more lemonade and less iced tea.c. buy more iced tea and lemonade.d. buy less iced tea and lemonade.e. none of these.
Answer:
A
Explanation:
Marginal utility is the additional utility derived from consuming one more unit of a good
the consumption decision is to consume more units of a good that gives the higher utility per good.
Marginal utility per good = marginal utility / price of the good
When marginal utility is positive, it means that increasing consumption by one unit increases total utility
When marginal utility is negative, it means that increasing consumption by one unit decreases total utility
When marginal utility is zero, total utility has reached its maximum and no more units of goods would be consumed
An example of marginal utility. Imagine a traveller arriving from the desert where he hadn't had a drink of water in days .he is offered his first glass of water. the first cup of water he drinks would give him the highest utility. As more and more cups of water is drank, marginal utility decreases. At the point where he is fully satisfied, he stops drinking water and marginal utility becomes zero.
Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift a. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. b. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages. c. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. d. demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages.
Answer:
b. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.
Explanation:
In the case when the government impose the tax of 20% on sweetened beverages so here the price should be increased but at the same time the quantity is decreased as the supply curve shifted to the leftward where the demand curve is not impacted at all due to this things the price increased and the demand is decreased
Therefore the option b is correct
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. $27,000b. $32,000c. $34,800d. $37,400
Answer:
See below
Explanation:
Given the above information,
= ($110,000 × 12 + $30,000 × 5) / 60,000 × 1,000
= ($1,320,000 + $150,000) / 60,000,000
= $1,470,000 / 60,000,000 + $300,000/60,000) × 1,000
= $0.0245 + $5,000
= $5,000
What is the power to make the decision necessary to complete a task called
An example of foreseeable damages from a faulty repair of your car that led to an accident would be __________. your loss of a winning lottery ticket that blew away in the wind during the accident additional hotel and travel charges that you incurred, because you missed your flight that day as a result of the accident your loss of one year's wages from a job, since you were fired that day for being late after the accident the cost to repair your vehicle, as well as all damage to other vehicles involved in the accident
Answer:
the cost to repair your vehicle, as well as all damage to other vehicles involved in the accident.
Explanation:
A contract can be defined as an agreement between two or more parties (group of people) which gives rise to a mutual legal obligation or enforceable by law.
There are different types of contract in business and these includes: fixed-price contract, cost-plus contract, bilateral contract, implies contract, unilateral contract, adhesion contract, unconscionable contract, option contract, express contract, executory contract, etc.
A foreseeable damage can be defined as a any form of damage that the parties to a contract knew or took note of at the time when they were signing an agreement to the contract. Thus, it is the ability of an individual to reasonably anticipate the likelihood of damage or potential injury in a given circumstance such as an accident.
This ultimately implies that, foreseeable damages involves the ability of a reasonable individual to anticipate the potential results of his or her actions such as damage or injury to another person due to the refusal to repair a faulty car.
An example of foreseeable damages from a faulty repair of your car that led to an accident would be the cost to repair your vehicle, payment of hospital bill for the injured, including the damage to other vehicles that were involved in the car accident.
planing function means
Answer:
Explanation:
Planning function is the process of establishing goals and arranging them in logical order for the purpose of achieving a desired goal.
Planning is an important aspect of an organization so as to help them achieve their goals faster. It is done at all levels in an organization. Planning is done using the available resources, also achieving a balance between the needs and wants of the organization.
Four thousand bonds with a face value of $1,000 each, are sold at 104. The entry to record the issuance is Group of answer choices Cash 4,160,000 Bonds Payable 4,160,000 Cash 4,000,000 Premium on Bonds Payable 160,000 Bonds Payable 4,160,000 Cash 4,160,000 Premium on Bonds Payable 160,000 Bonds Payable 4,000,000 Cash 4,160,000 Discount on Bonds Payable 160,000 Bonds Payable 4,000,000
Answer:
Dr Cash 4,160,000
Cr Premium on Bonds Payable 160,000
Cr Bonds Payable 4,000,000
Explanation:
Preparation of the entry to record the issuance
Based on the information given The entry to record the issuance is:
Dr Cash $4,160,000
[(4000*1000)*104%]
Cr Premium on Bonds Payable $160,000
($4,160,000-$4,000,000)
Cr Bonds Payable $4,000,000
(4000*1000)
(To record the issuance)
Suppose a natural monopoly is regulated such that the price charged must be equal to the marginal cost of providing the good. This type of regulation is called ________ regulation.
Answer:
Price
Explanation:
The marginal cost pricing rule refers to the price rule for the natural monopoly that fixed the price and the same should be equivalent to the marginal cost. Also, it give sufficient output in order to meet out the overall market demand at the time when the average total cost is less as compared to two or more firms
So, it is a price regulation
Bee Inc. is working on its cash budget for March. The budgeted beginning cash balance is $35,000. Budgeted cash receipts total $116,000 and budgeted cash disbursements total $110,000. The desired ending cash balance is $51,500. To attain its desired ending cash balance for March, the company needs to borrow:
Answer:
$10,500
Explanation:
Bee Inc.
Cash Budget for March
Budgeted Receipts $116,000
Les Budgeted Expenses ($110,000)
Net Cash $6,000
Add Budgeted Beginning Balance $35,000
Balance $41,000
Loan ($51,500 - $41,000) $10,500
therefore,
To attain its desired ending cash balance for March, the company needs to borrow $10,500
The primary purpose for using the the mean absolute error (MAE) in forecasting is to: A. remove forecast error B. estimate the trend line C. estimate forecast error D. seasonally adjust the forecast
Answer:
measure forecast accuracy
Explanation:
The main purpose for using the mean absolute error is to do the forecast in an accurate manner. Also, it provides the measure for total forecast error for the given model
Therefore as per the given situation, the above represent the answer as neither it remove the error, nor estimated the trend line, etc
So, the same should be considered
More than 99% of all U.S. firms are classified as small businesses, and they employ about half of private workers. A small business is defined as any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. Understanding the advantages and disadvantages of small business ownership is crucial for any potential entrepreneur.
Match each statement or scenario with the appropriate advantage or disadvantage of small business
i. ownership.ii. Focusiii. Reputationiv. High stress levelv. Inexperience/Incompetencevi. Flexibilityvii.Inability to cope with growthviii.Costsix. Independencex. High failure rateMatch each of the options above to the items below.1. One of the leading reasons for becoming your own boss. 2. A 20-employee factory does not have a designated accounting or advertising department.3. The pizzas offered on the Patrick’s Pizza menu are often based on the types of produce in season.4. Mike’s trucking business provides specific information and products to commercial truck drivers.5. Brandy’s nursery offers delivery and expert installation of their trees at no extra cost to the customer and will replace any defective one up to 3 years after purchase.6. Sue works more than 60 hours a week at her construction business and cannot find reliable suppliers for lumber inventory.
7. Half of all new employer firms fail within the first five years.8. As a fitness expert, Tyler is having difficulties understanding the accounting requirements for his bank business loan for his workout facility.9. Circumstances such as products not arriving on time due to limited capacity affect the reputation of a company more than any other factor.
Answer:
A
Explanation:
Why is nominal value important ?
Answer: A preferred stock's nominal (par) value is important in that it is used to calculate its dividend while the nominal value of common stock is an arbitrary value assigned for balance sheet purposes. In economics, nominal value refers to the current monetary value and does not adjust for the effects of inflation.
Explanation:
Hope it helps
Horace Company manufactures a professional-grade vacuum cleaner and began operations in 2020. For 2020, Horace budgeted to produce and sell 25,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2020 are as follows:_______.
Data: Units produced 21,000 Units sold 18,500 Selling price $432 Variable cost: Manufacturing cost per unit produced: Direct materials $33 Direct manufacturing labor $23 Manufacturing Overhead $62 Marketing cost per unit sold $46 Fixed cost: Manufacturing costs $1,550,000 Administrative costs $906,000 Marketing costs $1,479,000
Requirements:
1. Prepare a 2020 income statement for Horace Company using variable costing.
2. Prepare a 2020 income statement for Horace Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirements 1 and 2.
4. Horace's management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modifications could Horace management make to improve such aplan? Explain briefly.
Answer:
Horace Company
1. 2020 Income Statement using variable costing
Sales revenue $7,992,000
Variable Cost of goods sold:
Manufacturing costs $2,183,000
Marketing cost per unit sold $851,000
Contribution margin $4,958,000
Fixed Costs:
Manufacturing costs $1,550,000
Administrative costs $906,000
Marketing costs $1,479,000
Total fixed costs = $3,935,000
Net income = $1,023,000
2. 2020 Income Statement using absorption costing:
2. Sales revenue $7,992,000
Cost of goods sold:
Variable Manufacturing costs $2,478,000 ($118 * 21,000)
Fixed Manufacturing costs 1,550,000
Total cost of production $4,028,000
Less Ending Inventory 479,525
Cost of goods sold $3,548,475
Gross profit $4,443,525
Period costs:
Variable marketing costs $851,000
Fixed marketing costs 1,479,000
Administrative costs 906,000
Total period costs $3,236,000
Net income $1,207,525
3. The differences that Horace obtains in the operating incomes under variable costing and absorption costing are due to the fixed manufacturing costs that are included in the ending inventory under absorption costing, making the cost of goods sold to be less and resulting in more profits. Under variable costing, the ending inventory does not include the fixed manufacturing costs. So the cost of goods sold is higher, resulting in reduced profits.
4. A bonus for Horace's supervisors based on gross margin under absorption costing will entice supervisors to produce more and sell less products so that the fixed costs can be carried forward. Many products will be left in inventory at the end of the period, which is then carried forward to the following period, thus, enhancing the period's gross profit for maximum bonus for the supervisors.
Modifications that Horace management could make to improve the bonus plan is ensuring that production units do not exceed the budgeted sales units by a large margin and ensuring that ending inventory does not exceed an established limit. This will entice the supervisors to produce according to market demand.
Explanation:
a) Data and Calculations:
Budgeted production and sales units for 2020 = 25,000
Actual production units for 2020 = 21,000
Actual sales unit for 2020 = 18,500
Ending inventory units for 2020 = 2,500
Selling price per unit = $432
Sales revenue = $7,992,000 ($432 * 18,500)
Variable cost:
Manufacturing cost per unit produced:
Direct materials $33
Direct manufacturing labor $23
Manufacturing Overhead $62 $118
Marketing cost per unit sold $46
Total variable costs per unit $164
Fixed cost:
Manufacturing costs $1,550,000
Administrative costs $906,000
Marketing costs $1,479,000
Total fixed costs = $3,935,000
1. 2020 Income Statement using variable costing
Sales revenue $7,992,000 ($432 * 18,500)
Variable Cost of goods sold:
Manufacturing costs $2,183,000 ($118 * 18,500)
Marketing cost per unit sold $851,000 ($46 * 18,500)
Contribution margin $4,958,000 ($268 * 18,500)
Fixed Costs:
Manufacturing costs $1,550,000
Administrative costs $906,000
Marketing costs $1,479,000
Total fixed costs = $3,935,000
Net income = $1,023,000
2. Sales revenue $7,992,000
Cost of goods sold:
Variable Manufacturing costs $2,478,000 ($118 * 21,000)
Fixed Manufacturing costs 1,550,000
Total cost of production $4,028,000 (per unit = $191.81)
Less Ending Inventory 479,525 ($191.81 * 2,500)
Cost of goods sold $3,548,475
Gross profit $4,443,525
Period costs:
Variable marketing costs $851,000
Fixed marketing costs 1,479,000
Administrative costs 906,000
Total period costs $3,236,000
Net income $1,207,525
