PESTLE helps in identification of business risks and threats an organization might face in the process of achieving the organizational goals.
What is PESTLE?PESTLE is a method of analysis in strategic management where there is focus on identifying the risks to the business even before the implementation of the activities.
Hence, the significance of PESTLE is aforementioned.
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An example of a push strategy is ________. organizing couponing campaigns utilizing newspaper advertising using television advertising employing direct marketing paying a shelf fee
Answer: Using television advertising
Explanation:
Push marketing strategy, refers to the strategy whereby take its products to the consumers in order to increase the exposure of the product.
Push marketing simply means pushing the brand through the use of promotions and paid advertisiment. On the other hand, pull strategy draws customers towards the product.
Consider two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.2. Stock B has an expected return of 14% and a beta of 1.8. The expected market rate of return is 9% and the risk-free rate is 5%. Security __________ would be considered the better buy because
Answer:
B; it offers an expected excess return of 1.8%
Explanation:
Here are the options :
A; it offers an expected excess return of .2%A; it offers an expected excess return of 2.2%B; it offers an expected excess return of 1.8%B; it offers an expected return of 2.4%
to determine which stock is the better buy, we have to calculate the expected return of the stocks using CAPM
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
Stock A = 5% + 1.2(9% - 5%) = 9.8%
Stock B = 5% + 1.8(9% - 5%) = 12.20%
The next step is to determine the excess return
stated expected return - calculated expected return = excess return
Stock A's excess return = 10% - 9.8% - 0.2%
Stock B's excess return = 14 - 12.20 = 1.8%
Security B would be considered because it has a higher excess return
Miguel works for an organization that collects books from donors and redistributes the books to schools to promote literacy and good reading habits. The company is funded by a government grant. Miguel works for a(n) ________.
A primary function of the promotional mix is to Multiple Choice explain how to use a product. persuade consumers to try a product. inform customers of complementary offerings. inform customers of pricing changes. point out flaws in competitors' products.
Answer: persuade consumers to try a product.
Explanation:
The Promotional Mix has to do with the promotional tools which are used by a company in order to create, and increase the demand for the goods and services offered by the company.
The Promotional Mix integrates promotional tools like direct marketing, personal selling, Advertising, Sales Promotion, etc
The promotional mix is useful in informing the prospective buyers about the importance of a good or service and also convince them to try it and the benefits attached to the product.
1. Prepare the December 31 adjusting entries for the following transactions. Omit explanations. 1. Fees accrued but not billed, $6,300. 2. The supplies account balance on December 31, $4,750; supplies on hand, $960. 3. Wages accrued but not paid, $2,700. 4. Depreciation of office equipment, $1,650. 5. Rent expired during year, $10,800.
Answer:
1. Debit Accounts Receivable $6300
Credit Fees Revenue $6300
2. Debit Supplies Expense $3790
Credit Supplies $3790
3. Debit Wages Expense $2700
Credit Wages Payable $2700
4. Debit Depreciation Expense $1650
Credit Accumulated Depreciation-office equip. $1650
5. Debit Rent Expense $10800
Credit Prepaid Rent $10800
Explanation:
Preparation of the December 31 adjusting entries
1. Debit Accounts Receivable $6300
Credit Fees Revenue $6300
2. Debit Supplies Expense $3790
Credit Supplies $3790
(4750-960)
3. Debit Wages Expense $2700
Credit Wages Payable $2700
4. Debit Depreciation Expense $1650
Credit Accumulated Depreciation-office equip. $1650
5. Debit Rent Expense $10800
Credit Prepaid Rent $10800
Part of the budgeting process is summarizing the financial statement effects on the budgeted income statement and the budgeted balance sheet.
a. true
b. false
Answer:
a. true
Explanation:
The production, sales, and the financial objected of the company are predicted via applying the various independent budgets. Also these budget should become the portion of the master budget. The impact should be collated on the budgeted balance sheet, income statement, and the cash budget
Therefore the given statement is true
Which of the following is an example of a positive economic statement? Question 19 options: a) Corrupt politicians ought to be voted out of office. b) An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased. c) Marginal tax rates should be reduced for individuals in the highest tax bracket. d) Workers with families should be paid at least the minimum wage. e) If crime rates were reduced, the world would be a better place to live.
Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2016, for $6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2017, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2017 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.
1. How much warranty expense does the company report in 2016 for this copier?
2. How much is the estimated warranty liability for this copier as of December 31, 2016?
3. How much warranty expense does the company report in 2017 for this copier?
4. How much is the estimated warranty liability for this copier as of December 31, 2017?
5. Prepare journal entries to record (a) the copier’s sale; (b) the adjustment on December 31, 2016, to recognize the warranty expense; and (c) the repairs that occur in November 2017.
Answer:
1. $240
2. $240
3. $0
4. $31
5. August 16, 2016
Dr Cash $6,000
Cr Sales $6,000
Aug. 16, 2016
Dr Cost of goods sold $4,800
Cr Merchandise inventory $4,800
Dec 31,2016
Dr Warranty expense $240
Cr Estimated warranty liability $240
Nov. 22, 2017
Dr Estimated warranty liability $209
Cr Repair parts inventory $209
Explanation:
1. Calculation to determine How much warranty expense does the company report in 2016 for this copier
Warranty expense = 4% × $6,000
Warranty expense= $240
Therefore the amount of warranty expense that the company report in 2016 for this copier is $240
2. Calculation to determine How much is the estimated warranty liability for this copier as of December 31, 2016
Estimated warranty liability= 6% × $6,000
Estimated warranty liability= $240
Therefore estimated warranty liability for this copier as of December 31, 2016 is $240
3. The 2017 warranty expense that the company report in 2017 for this copier will be $0 because NO ADDITIONAL WARRANTY EXPENSE in the year 2017 should be reported for this copier
4. Calculation to determine how much is the estimated warranty liability for this copier as of December 31, 2017
2017 ESTIMATED WARRANTY LIABILITY
Beginning 2017 balance $240
(4%*$6,000)
Less Parts cost ($209)
Ending 2017 balance $31
Thereforea m the estimated warranty liability for this copier as of December 31, 2017 is $31
5. Preparation of the journal entries
August 16, 2016
Dr Cash $6,000
Cr Sales $6,000
Aug. 16, 2016
Dr Cost of goods sold $4,800
Cr Merchandise inventory $4,800
Dec 31,2016
Dr Warranty expense $240
Cr Estimated warranty liability $240
Nov. 22, 2017
Dr Estimated warranty liability $209
Cr Repair parts inventory $209
A company's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130. The amount of sales required to realize an operating income of $200,000 is Group of answer choices
Answer:
The answer is 14,167 units
Explanation:
Target sales is the amount of sales a company has projected itself to sell within a particular period.
Target sales(in units) =
(Fixed cost + target income) / contribution margin
Where contribution margin is sales in unit minus variable costs
($1,500,000 + $200,000) / $250 - $130
$1,700,000/$120
=14,167 units
Therefore, 14,167 units is the amount of sales that will need to be recorded to generate an operating income of $200,000
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity (YTM) has a coupon rate of 6%. The yield to maturity of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:_________.
a.) $841,635.85
b.) $715,390.47
c.) $530,230.59
d.) $1,009,963.02
Answer:
a.) $841,635.85
Explanation:
The value of the Treasury note is the present value of its future cash flows, its semiannual coupon payments and the face value receivable by the investors in the T-note at maturity.
Semiannual coupon=face value*coupon rate*6/12
face value=$1,000,000
coupon rate=6%
semiannual coupon=$1,000,000*6%*6/12
semiannual coupon=$30,000( there would 8 semiannual coupons in 4 years)
The present value of the cash flows can be determined using a financial calculator bearing in mind that the calculator would be set to its default end mode before making the following inputs:
N=8(semiannual coupons)
PMT=30000(amount of each semiannual coupon)
I/Y=5.50%(semiannual yield to maturity=11.00%*6/12)
FV=1000000(the face value of T-note)
CPT
PV=$841,635.85
Cape Corp. will pay a dividend of $3.60 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever. a. If you want a return of 17 percent, how much will you pay for the stock
Answer:
$30
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
$3.6 / (0.17 - 0.05)
$3.60 / 0.12 = $30
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 44,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $521,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $687,120 and its actual total direct labor was 44,500 hours. Required: Compute the company’s plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)
Answer:
Predetermined manufacturing overhead rate= $13.84 per direct labor hour
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (521,000 / 44,000) + 2
Predetermined manufacturing overhead rate= 11.84 + 2
Predetermined manufacturing overhead rate= $13.84 per direct labor hour
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
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
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:
Ramble On Co. wishes to maintain a growth rate of 13.6 percent per year, a debt-equity ratio of 1.8, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at .98. What profit margin must the firm achieve
Answer: 5.99%
Explanation:
Based on the question,
Dividend payout ratio = 30%
Therefore, the retention ratio will be:
= 1 - 30%
= 70%
Growth rate = 13.6%
We'll the use the sustainable growth rate formula which will be:
0.136 = (ROE x 0.7)/ (1-(ROE x 0.7))
0.136(1 - (0.7ROE)) = 0.7ROE
ROE = 0.136/0.7952
ROE = 0.171026
Then, the Profit margin will be:
ROE = Profit Margin x Asset Turnover x Equity multiplier
0.171026 = PM x (1/0.98) x (1 + 1.8)
0.171026 = PM x (1/0.98) x 2.8
PM = 0.171026 x 0.98/2.8
PM = 0.0598591
Profit margin = 5.99%
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
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you. a. If the company has 470,000 shares outstanding and the stock currently sells for $41, how much will it cost you to buy a seat if the company uses straight voting
Answer: $9,635,041
Explanation:
With 470,000 shares, you will need to hold a majority to vote yourself into the board.
To gain a majority, you need more than 50% of the shares:
= 470,000 / 2 + 1 share to give you majority
= 235,001 shares
The cost of 235,001 shares is:
= 235,001 * 41
= $9,635,041
Photo Framing's cost formula for its supplies cost is $1,000 per month plus $10 per frame. For the month of November, the company planned for activity of 610 frames, but the actual level of activity was 600 frames. The actual supplies cost for the month was $7,600. The spending variance for supplies cost in November would be closest to:
Answer:
$600 U
Explanation:
Calculation to determine what The spending variance for supplies cost in November would be closest to:
Actual results$ 7600
Less Flexible budget $7,000
($1,000 + $10 × 600)
Spending variance $600 U
($7,600-$7,000)
Therefore The spending variance for supplies cost in November would be closest to: $600 U
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
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)
You sell 25,000 loaf of bread per year. The carrying cost associated the main ingredient wheat flour is estimated to be $8 per unit (amount used for 1 loaf of bread) per year, and the ordering cost is $10 per order. And assume 1 year is 300 days and lead time is 3 days.
Required:
a. What is the EOQ?
b. How much money you will lose if you order 300 units of wheat flour? Calculate the total cost of inventory with EOQ model and with order size is 300. The difference will give you the answer.
c. Calculate the re-order point (assuming no uncertainty)?
Answer:
Annual Demand (D) = 25000
Carrying Cost (H) = 8
Ordering Costs (S) = 10
Number of working days = 300
Lead Time (Lt) = 3 days
a. EOQ = Sqrt (2*D*S/H)
EOQ = Sqrt (2*25000*10/8)
EOQ = Sqrt (62500)
EOQ = 250
b. Total Cost = (D * S) / EOQ + (EOQ * H) / 2
Total Cost = (25000 * 10) / 250 + (250 * 8) / 2
Total Cost = 1000 + 1000
Total Cost = 2000
Now, we calculate total Cost with order size: of 300
Total Cost = (25000 * 10) / 300 + (300 * 8) / 2
Total Costs = 833.3333 + 1200
Total Cost = 2,033.3333
The amount to lost if we order 300 units of wheat flour is as follows
= 2033.33 - 2000
= $33.33
3. ROP = (D / Number of working days) x Lt
ROP = (25000 / 300) * 3
ROP = 83.3333 * 3
ROP = 249.9999
ROP = 250
Favre and Carter Law Office employ 12 full-time attorneys and 5 paraprofessionals. Budgeted salaries include $100,000 for each attorney and $30,000 per paraprofessional. For 20x1, indirect costs were budgeted at $250,000, but actually amounted to $300,000. Actual salaries were $110,000 for each attorney and $30,000 for each paraprofessional. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Total budgeted labor-hours were 50,000; however, actual labor-hours were 60,000.
How much should the client be billed in a normal costing system which uses budgeted rate and cost allocations are based on actual data, when 1,000 professional labor-hours were used?
a. $27,000
b. $32,000
c. $34,800
d. $37,400
Answer:
Billed costs= $32,000
Explanation:
Giving the following information:
Total estimated cost attorney= 12*100,000= $1,200,000
Total estimated cost paraprofessional= 5*30,000= $150,000
Estimated Indirect costs= $250,000
Estimated number of hours= 50,000
First, we need to calculate the allocation rate:
Allocation rate= total estimated costs for the period/ total amount of allocation base
Allocation rate= (1,200,000 + 150,000 + 250,000) / 50,000
Allocation rate= 1,600,000/50,000
Allocation rate= $32
Now, for 1,000 hours:
Billed costs= 1,000*32= $32,000
with the aid of graphs, illustrate the effect of a change in demand for chicken by restaurants to a chicken farmer
Answer:
Systematic component of demand = (level + trend) X seasonal factor
Explanation:
Now in the given case, we can use the above equation as well as graphs based on historical trends to define the demand of chicken during each season. When the demand is high, chicken prices can lead to an increase with more pressure on chicken farmer to supply more chicken.
Suppose that the production function is y= 9k^0.5 N^0.5. With this production function, the marginal product of labor is MPN= 4.5K^0.5 N^-0.5. The capital stock is K= 25. The labor supply curve is NS= 100[(1-t)w]^2, where w is the real wage rate, t is the tax rate on labor income, and hence (1-t)w is the after-tax real wage rate.
Required:
a. Assume that the tax rate on labor income, t, equals zero. Find the equation of the labor demand curve. Calculate the equilibrium levels of the real wage and employ- ment, the level of full-employment output, and the total after-tax wage income of workers.
b. Repeat part (a) under the assumption that the tax rate on labor income, t, equals 0.6.
Answer:
A) i) w/P = MPN , ( NS ) = 100[ (1-t) w]^2
ii) w = 1.5 , N = 225,
iii) y = 675 ,
iv) 337.5
B) i) ( NS ) = 100[(1-0.6)w]^2
ii) w = 2.372 , N = 90
iii) y = 426.91
iv) 85.839
Explanation:
Given data :
Production function ( y ) = 9k^0.5 N^0.5
MPN = 4.5k^0.5N^-0.5
capital stock ( K ) = 25
labor supply curve ( NS ) = 100[ (1-t) w]^2
assume P = 1
a) Determine
i) equation of labor demand curve = w/P = MPN
where; w = 22.5 N^-0.5 , N=506.25/(w^2)
labor supply curve ( NS ) = 100[ (1-t) w]^2
ii) equilibrium levels of real wage and employment
506.25/(w^2) = 100[(1-t)w]^2 ( equilibrium condition )
w ( equilibrium level of real wage ) = 1.5
equilibrium level of employment = 100[(1-t)w]^2 ; where t = 0 , w = 1.5
= 100 ( 1 * 1.5 )^2
N = 225
iii) level of full-employment y = 9k^0.5 N^0.5 ; where N = 225 , k = 25
= 9(25)^0.5 * (225)^0.5
y = 675
iv) Total after-tax wage income of workers
= w*N = ( 225 * 1.5 ) = 337.5
B) assuming t = 0.6
i) equation of labor demand curve
labor supply curve ( NS ) = 100[(1-0.6)w]^2 = 16 w^2
ii) equilibrium levels ; 16w^2 = 506.25/(w^2).
w( equilibrium real wage ) = 2.372
Equilibrium employment ( N )= 16 * ( 2.372 )^2 =90
iii) level of full employment y = 9k^0.5 * 90^0.5
= 9(25)^0.5 * 90^0.5 = 426.91
iv) Total after tax wage/income of workers
= (1-0.6)*2.372*90 = 85.839
Which 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
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
IF COUNTRIES FIND WAYS OF IMPROVING THEIR FACTOR OF PRODUCTIVITY
Answer:
THEIR FACTOR OF PRODUCTIVITY will increase.
If a company is overly optimistic about debt collection, the company will understate bad debt expense and:
Answer:
overstate net income but days to collect will increase.
Explanation:
A bad debt expense is defined when any receivable is no more collectible as the customer is not able to fulfil or satisfy the obligation in order to pay the obligation of paying an outstanding debt because of some financial problems or due to bankruptcy.
Thus when any organization is more optimistic about the debt collection, it will understate the bad debt expenses and will also overstate the net income. But in this case the number of days to collect the payment increases.
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
