Answer:
A
Explanation:
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
risk free + (beta x market premium)
6 + (0.9 X 7) = 12.3%
Coronado Company received proceeds of $209000 on 10-year, 5% bonds issued on January 1, 2016. The bonds had a face value of $220000, pay interest annually on January 1, and have a call price of 102. Coronado uses the straight-line method of amortization. Coronado Company decided to redeem the bonds on January 1, 2018. What amount of gain or loss would Coronado report on its 2018 income statement
Answer:
Coronado Company
The amount of gain or loss that Coronado would report on its 2018 income statement is:
= $13,200.
Explanation:
a) Data and Calculations:
Bonds proceeds = $209,000
Bonds face value = 220,000
Bonds Discounts = $11,000
Period of bonds = 10 years
Straight-line amortization = $1,100 annually
Interest payment = annually
Coupon rate rate = 5%
Fair value on January 1, 2017 = $210,100 ($209,000 + $1,100)
Fair value on January 1, 2018 = $211,200 ($210,100 + $1,100)
Call price = 102
Total call value (cash payment) = $224,400 ($220,000 * 102/100)
Loss to report on its 2018 income statement = $13,200 ($224,400 - $209,000 - $2,200)
You estimate that your cattle farm will generate $0.10 million of profits on sales of $2 million under normal economic conditions and that the degree of operating leverage is 5.a. What will profits be if sales turn out to be $1.6 million
Answer:
Profit would decrease to $0.0 million
Explanation:
The degree of operating leverage is the change in profit as a result of the change in sales revenue
DOL=% change in profit/% change in sales
DOL=5
% change in profit=unknown
% change in sales=($1.6m-$2.0m)/$2.0m
% change in sales=-20%
5=% change in profit/-20%
% change in profit=5*-20%
% change in profit=-100%
the new amount of profit=current amount of profit*(1-% change in profit)
current amount of profit=$0.10 million
the new amount of profit=$0.10 million*(1-100%)
the new amount of profit=$0.0 million
A 10-year loan in the amount of $100,000 is to be repaid in equal monthly payments. The interest rate is 12 percent, compounded monthly. What is the amount of principal paid in the loan payment for month 3
Answer:
The amount of principal paid in the loan payment for month 3 is:
= $443.45.
Explanation:
a) Data and Calculations:
Loan amount = $100,000
Interest rate per annum = 12%
Period of loan = 10 years or 120 months
Repayment of loan principal and interest = equal monthly payments.
3rd Month Payment:
Total payment = $1,434.71
Interest $991.26
Principal = $443.45
Schedule of Payment for the first 3 months:
Period PV PMT Interest FV
1 $100,000.00 $1,434.71 $1,000.00 $99,565.29
2 $99,565.29 $1,434.71 $995.65 $99,126.23
3 $99,126.23 $1,434.71 $991.26 $98,682.79
2. Through stores that employ a team-based management approach and that offer an appealing shopping environment / experience, Whole Foods can charge higher prices because they offer the highest quality natural and organic foods available with customer service superior to their competitors. This explanation is best described as Whole Foods' ______.
Answer:
differentiation strategy
Explanation:
Based on the information above, it is possible to affirm that Whole Foods is a company that uses a strategy of differentiation in its products and services, as its management approach is based on a team that offers an attractive shopping environment / experience, in addition to charging higher prices for offering high quality natural and organic foods, as well as superior customer service than its competitors.
The differentiation strategy consists of actions used by companies to make their products and services attractive to their potential audience, offering added benefits and advantages that the consumer can perceive and value, making the company more competitive and well positioned in relation to its competitors .
What do you call it when you don't invest in your new and smaller businesses?
Answer:
investment foe buisness
When you don't invest in your new and smaller businesses, it is called debt investment.
Debt investment basically means opting to use an amount borrowed to finance one's business (either big or small business). This investment refers to a scenario when an investor (i.e. banks) lend money to the entrepreneur with the expectation that the entrepreneur will pay-back the investment with interest.
This type of business running system is somewhat burdensome because of repayment of the loan with interest.
The advantage of this method of financing is that the capital is fully provided to the business owner.
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In the market for wireless earbuds (a normal good), indicate whether the following events would cause an "increase or a decrease in demand" or an "increase or a decrease in the quantity demanded." a. There is an increase in the price of carrying cases for wireless earbuds. A. increase in demand. B. decrease in demand. C. increase in quantity demanded. D. decrease in quantity demanded.
Answer: D. decrease in quantity demanded.
Explanation:
A change in demand is caused by the factors that affect demand except the price. The movement along the demand curve is as a result of the price change.
An increase in demand will lead to the rightward shift of the demand curve and a decrease in send will lead to the leftward shift of the demand curve.
On the other hand, an increase or decrease in the quantity demanded will lead to the movement along a given demand curve.
Based on the question, when there is an increase in the price of carrying cases for wireless earbuds, this will lead to a reduction in the quantity demanded of wireless earbuds as less people will buy the earbuds.
Imitation by rivals is most challenging when Group of answer choices resources must be built over time. resources and capabilities require a high level of capital investment. resources are unique. resources and capabilities are accessible and require low levels of investment. capabilities reflect a high level of social complexity and causal ambiguity.
Answer:
capabilities reflect a high level of social complexity and causal ambiguity.
Explanation:
The more complex of ambiguous a product is, the more challenging it is for rivals to imitate the product
Allison bought a bond when it was issued by ABC Corporation 20 years ago. The bond, which has a $1,000 face value and a coupon rate equal to 10 percent, matures in eight years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar risk investments is 8 percent, what should be the current market value (price) of the bond
Answer:
Current market value (price) of the bond = $ 1,081.11
Explanation:
The current market value (price) of the bond can be calculated using the following excel function:
Current market value (price) of the bond = PV(rate, NPER, -PMT, -FV) ........... (1)
Where:
rate = Semiannual yield on similar risk investments = yield on similar risk investments / 2 = 8% / 2 = 4%
NPER = Number of period = Year to maturity * Number of semiannuals in a year = 8 * 2 = 16
PMT = Payment = (FV * Coupon rate) / Number of semiannuals in a year = ($1,000 * 10%) / 2 = $50 = 50
FV = Face value = $1,000 = 1000
Substituting all the relevant value into equation (1), we have:
Current market value (price) of the bond = PV(4%, 10, -50, -1000)
Inputing =PV(4%, 10, -50, -1000) in any cell in excel sheet (Note: as done in the attached excel file), we have:
Current market value (price) of the bond = $ 1,081.11
Each unit requires 0.75 hours of direct labor at a cost of $6.50 per hour. What is the cost of direct labor for May?
Answer:
Direct labor cost = (units produced for May) x 0.75 x $6.50
Explanation:
Direct labor cost = units produced x direct labor hours x cost per unit
since units produced aren't given
Let units produced = 10,000 for May
Direct labor cost = 10,000 x 0.75 x $6.50 = $48,750
Cost of debt with fees. Kenny Enterprises will issue a bond with a par value of $1,000, a maturity of twenty years, and a coupon rate of 7.5 % with semiannual payments, and will use an investment bank that charges $25 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices?
a. $982.48
b. $1,004.93
c. $1,068.15
d. $1,171.91
Answer:
Kenny Enterprises
Cost of Debt with fees:
Market Prices $982.48 $1,004.93 $1,068.15 $1,171.91
Cost of debt (b- a) $48.59 $26.14 ($37.08) ($140.84)
Cost of debt in percentage 4.86% 2.61% -3.71% -14.08%
Explanation:
a) Data and Calculations:
Market Prices $982.48 $1,004.93 $1,068.15 $1,171.91
Investment bank charges 25.00 25.00 25.00 25.00
a) Net bonds proceeds $957.48 $979.93 $1,043.15 $1,146.91
b) Repayments:
PV of interest payments $770.66 $770.66 $770.66 $770.66
PV of principal ($1,000) 235.41 235.41 235.41 235.41
Total repayments $1,006.07 $1,006.07 $1,006.07 $1,006.07
Cost of debt (b- a) $48.59 $26.14 ($37.08) ($140.84)
Cost of debt in percentage 4.86% 2.61% -3.71% -14.08%
Present values of interest payments:
N (# of periods) 40
I/Y (Interest per year) 7.5
PMT (Periodic Payment) 37.5
FV (Future Value) 0
Results
PV = $770.66
Sum of all periodic payments $1,500.00
Total Interest $729.34
Present value of principal repayment:
N (# of periods) 20
I/Y (Interest per year) 7.5
PMT (Periodic Payment) 0
FV (Future Value) 1000
Results
PV = $235.41
Total Interest $764.5
Company xyz made the following transactions 6 marks
Borrowed loan of ksh 50000 to start a business
Obtained Ksh 150,000 in cash from proceeds of sales
Paid out ksh 240000 in form of salaries
Purchased Ksh 600000 worth of machinery in cash
Purchased a track valued at Ksh 1, 500 000 by paying Ksh 300000 in cash and getting a
loan for the reminder
Paid rent of rent of Ksh 80000 and advertising of ksh 50,000 in cash each
Determine the value of the company’s assets, liability and equity
Answer:
Company XYZ
Total assets ksh 1,030,000
Total liabilities ksh 1,250,000
Total equity ksh (220,000)
Explanation:
a) Data and Analysis:
Cash ksh 50,000 Loan payable ksh 50,000
Cash ksh 150,000 Sales revenue ksh 150,000
Salaries expense ksh 240,000 Cash ksh 240,000
Equipment ksh 600,000 Cash ksh 600,000
Track ksh 1,500,000 Cash ksh 300,000 Loan payable ksh 1,200,000
Rent Expense ksh 80,000 Advertising Expense ksh 50,000 Cash ksh 130,000
Assets:
Cash ksh 50,000
Cash ksh 150,000
Cash ksh (240,000)
Equipment ksh 600,000
Cash ksh (600,000)
Track ksh 1,500,000
Cash ksh (300,000)
Cash ksh (130,000)
Total assets ksh 1,030,000
Liabilities:
Loan payable ksh 50,000
Loan payable ksh 1,200,000
Total liabilities ksh 1,250,000
Equity:
Sales revenue ksh 150,000
Salaries expense ksh (240,000)
Rent Expense ksh (80,000)
Advertising Expense ksh (50,000)
Total equity ksh (220,000)
Suppose a company is considering the following 5 independent projects:
Project
A
B
C
D
E
initial Investment
$100
$300
$400
$500
-$200
NPV
$20
$30
$40
$45
$15
What projects, if any, should be selected if the capital budget is $500?
Answer:
A & C
Explanation:
NPV, The Net Present Value of an investment is used in finance to calculate the profitability of a projected investment.
Since the capital budgeted for any investment is $500 ; hence the total initial investment the company can make should not exceed $500 ;
The company will be looking indulge in the most profitable investment, this we can judge Yung the NPV of each investment :
Therefore, the total NPV on investment A and Investment C is the highest while maintaining the $500 capital budget value.
Investment : ___ NPV
$100 - - - - - - - - > $20
$400 - - - - - - - - > 40
$500 - - - - - - - - > $60
A company issued bonds 8 years ago with original maturity of 25 years, 7.5% coupon rate with semiannual coupon payments, and a par value of $1,000. The current market interest rate is 11.75%. What is the bond's price?
a. $718.52
b. $690.22
c. $780.75
d. $890.46
e. $814.97
A company issued bonds 8 years ago with original maturity of 25 years, 7.5% coupon rate with semiannual coupon payments, and a par value of $1,000. The current market interest rate is 11.75%. The bond's price is $718.52. Option A is the correct answer.
To calculate the bond's price, we can use the present value formula. The present value of a bond is the sum of the present value of its future cash flows, which are the coupon payments and the final principal repayment. Option A is the correct answer.
1. Determine the number of periods: The bond has an original maturity of 25 years and semiannual coupon payments, so there are a total of 50 periods (25 years * 2).
2. Calculate the periodic coupon payment: The coupon rate is 7.5% and the par value is $1,000. Therefore, the annual coupon payment is $1,000 * 7.5% = $75. Since there are semiannual coupon payments, the periodic coupon payment is $75 / 2 = $37.50.
3. Determine the market interest rate: The current market interest rate is 11.75%, which is the rate we will use to discount the bond's cash flows.
4. Calculate the present value of the coupon payments: We will use the present value of an annuity formula to calculate the present value of the 50 coupon payments. The formula is: PV = C * (1 - (1 + r)⁻ⁿ) / r, where PV is the present value, C is the periodic coupon payment, r is the periodic interest rate, and n is the number of periods.
Using the formula, PV = $37.50 * (1 - (1 + 11.75% / 2)⁻⁵⁰) / (11.75% / 2), the present value of the coupon payments is approximately $613.74.
5. Calculate the present value of the final principal repayment: The final principal repayment is the par value of $1,000. We will use the present value formula PV = F / (1 + r)ⁿ, where PV is the present value, F is the future value (par value), r is the periodic interest rate, and n is the number of periods.
Using the formula, PV = $1,000 / (1 + 11.75% / 2)^50,
the present value of the final principal repayment is approximately $104.78.
6. Add the present value of the coupon payments and the present value of the final principal repayment to get the bond's price:
$613.74 + $104.78 = $718.52.
Therefore, the correct answer is a. $718.52.
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5) Big Corporation had the following sales over the last 4 years; Year Sales (in 000s) bgs 1 225.00 2 236.25 3 243.125 4 248.00 a) What was the growth rate in sales between years 1
Answer:
5%
Explanation:
a) What was the growth rate in sales between years 1 and 2
Growth rate measures the increase in the level of sales over a period of time
Growth rate from year 1 to 2 = (increase in sales from year 1 to 2 / sales in year 1) x 100
increase in sales from year 1 to 2 = 236.25 - 225 = 11.25
(11.25 / 225) x 100 = 5%
At your new job you estimate that your average salary over your working years will be $95,000 per year. How many more years would you have to work to receive as much benefit from a flat benefit of $3,000 times years of service as you would receive from 3.75 percent of your average salary times years of service?
Answer:
1.1875 or 1.19 times
Explanation:
The calculation of the no of years is to be given below;
= 3.75 % of average salary × years of service = 3000 × years of service
So,
= 0.0375 × 95000 × years of service = 3000 × years of service
So, the years of service is
= 3562.5 ÷ 3000
= 1.1875 or 1.19 times
Organizational learning and creativity play an important role in helping managers improve their decisions. Managers must take steps to promote organizational learning and creativity at individual as well as group levels to improve the quality of decision making. Managers can encourage and promote entrepreneurship that mobilizes resources to take advantage of an opportunity to provide customers with new or improved goods and services. The quality of managerial decision making ultimately depends on innovative responses to opportunities and threats. How can managers increase their ability to make nonprogrammed decisions that will allow them to adapt to, modify, and even drastically alter their task environments so they can continually increase organizational performance
Answer:
Organization learning is the process by which the managers seeks employees desires and ability to understand the task environment.
Explanation:
Organizational learning plays an important role in managers by raising their ability to make programmer decisions that will allow them by adapting to, modifying, and even alter their work environment. Creativity helps managers in thinking and problem solving.Heidi is having trouble understanding the Black Lives Matter (BLM) movement and why her workplace sent out an email affirming the company's commitment to diversity and inclusion. This is probably because as a white woman from a small town with little exposure to diversity efforts, Heidi has not had much education about what BLM is trying to accomplish. She is wrestling with this new information about systemic racism and ultimately dismisses it as unfounded because it is contrary to her past experiences. This is an illustration of which of the following. Pick the best answer from the list based on our book's discussion of these terms:
a. Stereotyping
b. An entrenched mental model
c. Leader-Member Exchange Theory
d. Ethnocentrism
e. Social Identity Theory
Answer:
e. Social Identity Theory
Explanation:
Identity is the sense of who and what we are and also where do we belong. According to this social identity theory, people is most likely to [tex]\text{favor their ingroup}[/tex] over an outgroup as the former is a part of their self-identity. It means that people tend to overestimate the features of their own group to which they belong whereas they try to minimize the characteristics of the other groups.
In the context, Heidi is finding it difficult to understand about the new email by the company about the Black Lives Matter movement. She is a woman from a small town and do not have much exposure to the diversity efforts. She dismisses the email as unfounded as it was contrary to her past experiences. This shows an example of social identity theory.
Cyberdyne Systems and Virtucon are competitors focusing on the latest technologies. Selected financial data is provided below. (Round your answers to 1 decimal place. Enter your answers in millions (i.e., $10,100,000 should be entered as 10.1).) ($ in millions)CyberdyneVirtucon Net sales$39,905 $5,684 Net income 10,375 1,194 Operating cash flows 14,865 1,334 Total assets, beginning 58,905 15,184 Total assets, ending 60,905 14,884 Required: 1. Calculate the return on assets for both companies.
Answer:
Return on assets for Cyberdyne Systems and Virtucon are 0.2 and 0.1 respectively.
Explanation:
Return on asset is a measure of the ratio of the net income to the total average assets of an entity or organization. It givens and insight into the company's ability to generate profits from the use of its assets.
For Cyberdyne Systems, given that Net income $10,375 and the assets at the beginning and end of the period are $58,905 and $60,905
Total average assets = ($58,905 + $60,905)/2
= $59,905
Return on assets = $10,375/$59,905
= 0.17319088
To one decimal place = 0.2
For Virtucon, given that Net income $1,194 and the assets at the beginning and end of the period are 15,184 and 14,884
Total average assets = ($15,184 + $14,884)/2
= $15,034
Return on assets = $1,194/$15,034
= 0.079419981
To one decimal place = 0.1
Show the change in the market for gasoline that is consistent with the following statement:
"When a war breaks out in the Middle East, the price of gasoline rises, and the price of a used Cadillac falls." (Hint: Assume that used Cadillacs are gas guzzlers that are undesirable to own if gasoline becomes more expensive.)
Answer:
Supply reduces and supply curve shifts left. Price increasesExplanation:
The Middle East supplies a significant amount of the world's oil which means that conflict there could disrupt the movement of oil in the world.
In this scenario there is a conflict. This conflict would cause the supply of oil to reduce which means that the Supply curve will be forced to shift left to show that it has dropped.
This new supply curve will then intercept with the demand curve at a higher equilibrium price thereby leading to a price increase.
Internal information: A. attempts to describe something that is unknown. B. describes the environment surrounding the organization. C. describes specific operational aspects of an organization. D. quantifiably describes something that is known.
Answer:
Option c: Describes specific operational aspects of an organization
Explanation:
Management information systems (MIS)
This is commonly used in planning for, development, management, and use of information technology tools to help individuals carry out all tasks related to information processing and management
Internal Information
This are simply refered to as a form of information that is gotten or developed from activities that occur within the organization. Example is sales
External Information
This simply gives a reason or an understanding of factors outside of the organization.
Internal data sources
They are said to be sources that are available within the organization. Examples of internal data sources includes: Customer profiles, Sales analysis reports, inventory analysis, production reports etc.
Rains Company is a furniture retailer. On January 14, 2022, Rains purchased merchandise inventory at a cost of $70000. Credit terms were 2/10, n/30. The inventory was sold on account for $300000 on January 21, 2022. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2022, and the accounts receivables were settled on January 30, 2022. Which statement is correct
Answer:
On January 30 , 2022, customers should remit cash in the amount of $297,000
Explanation:
Calculation to determine Which statement is correct
Based on the information given the statement that is correct will be On January 30 , 2022, CUSTOMERS SHOULD REMIT CASH in the amount of $297,000 calculated as:
Cash= (Sales amount × (1−.01))
Cash =$300,000 ×(1-.01)
Cash =$300,000 × .99
Cash = $297,000
You bought one soybean future contract at $5.13 per bushel. What would be your profit (loss) at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.
Answer:
Your profit at maturity is:
= $650.
Explanation:
a) Data and Calculations:
Cost of purchase of soybean future contract = $5.13 per bushel
Contract size bought = 5,000 bushels
Maturity spot price = $5.26 per bushel
Profit = Selling Price Minus Purchase cost
= ($5.26 - $5.13) * 5,000
= $0.13 * 5,000
= $650
b) You will be making a profit of $650 ($0.13 * 5,000) from the sale since it was bought at $5.13 per bushel and sold at $5.26 per bushel. Therefore, a profit of $0.13 ($5.26 - $5.13) per bushel was generated.
The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:
Answer: interest
Explanation:
Notes payable occurs when a promissory note is issued to the bearer by the firm. Notes payable can either be short term which is within a year or long term which is more than a year.
The difference between the amount received from issuing a note payable and the amount repaid at maturity is known as the interest.
How does the design demonstrate the ability to analyze, research, and explore a variety of information sources to adequately address how the target market might interpret a designmessage
Answer:
Design should be analyzed, explored and researched carefully so that it adequately targets the audience.
Explanation:
A design has the ability o inclines people's decisions and allows for interpretation. The design is can be used to tell whether the product is going to stay in the market and helps in the identification of the target audience. The market can interpret the message in design in various ways such as by positive and negative. Thus design should be made keeping in mind the ethics and characteristics of the object. Design should match the traits of people.g Todd Foley is applying for a $210,000 mortgage. He can select either a $1,470 monthly payment with no points or a $1,323 payment with 4 points. How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment
Answer:
57 months
Explanation:
Calculation to determine How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly
payments
Number of months to cover cost=(.04 x $210,000)/($1470-$1323)
Number of months to cover cost = $8400/147
Number of months to cover cost =57 months
Therefore the number of many months it will take Todd to cover the cost of the discount points if he takes the lower monthly
payments is 57 months
What is the reasoning behind having the seven Fed Board of Governors remain for 14 years on the Federal Reserve?
a) Participating in the Fed for the 14 year time period allows the board members to build up seniority and on-the-job understanding
b) Longer terms for board members fosters longer relationships and builds strong networks to push through financial changes to the economy.
c) The longer terms are to insulate the members from immediate political pressures and have them focus solely on economic solutions for the nation.
Answer: c) The longer terms are to insulate the members from immediate political pressures and have them focus solely on economic solutions for the nation.
Explanation:
The Fed is independent of the U.S. Government but can still face significant pressure from the U.S. Government as it is the President that nominates the Board of Governors and the Senate confirms them.
Much like Justices on the Supreme Court who get their positions the same way, these governors have to be protected from being used as political pawns so they are given long terms in office to ensure that they can pursue an independent policy without having to worry about the current administration coming after them if they go contrary to its will.
A tyre manufacturer wants to set a minimum mileage guarantee on its new MX100 tyre. Tests reveal the mean mileage is 47,900 with a standard deviation of 2,050 miles and the distribution is a normal distribution. The manufacturer wants to set the minimum guaranteed mileage so that no more than 4% of the tyres will have to be replaced. What minimum guaranteed mileage should the manufacturer announce
Answer:
51,487.5
Explanation:
Calculation to determine the minimum guaranteed mileage should the manufacturer announce
Sinces no more than 4% of the tires will have to be replaced First step will be to determine the InvNorm(.96) using normal distribution table
InvNorm(100%-4%)
InvNorm(.96) = 1.75
Now let determine the minimum guaranteed mileage
Let x represent the Minimum guaranteed mileage
(2050*1.75)+47,900=x
x=3,587.5+47,900
x = 51,487.5
Therefore the minimum guaranteed mileage that the manufacturer should announce is 51,487
Current Forecast is 2500 units, current 1st shift capacity is 1300 units. Market growth rate is 10%. How much capacity do you need to buy for next round (answer rounded up to next 50 units)
Answer:
250 units
Explanation:
Calculation to determine How much capacity do you need to buy for next round
Using this formula
Next round capacity needed=Current Forecast*Market growth rate
Let plug in the formula
Next round capacity needed=2500 units*10%
Next round capacity needed=250 units
Therefore How much capacity do you need to buy for next round is 250 units
Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,990,000 in annual sales, with an 7 percent profit margin. What would net income and return on assets (investment) be for the year
Answer:
Net income= 139,300
ROA= 27.86%
Explanation:
The assets to support the expansion is $500,000
It is estimated the entire database can generate $1,990,000
The profit is 7%
The net income can be calculated as follows
= 1,990,000×7/100
= 1,990,000×0.07
= $139,300
The ROA can be calculated as follows
= 139,300÷500,000
= 27.86%
What is the Selling Division’s opportunity cost per unit from selling 3,000 units to the Purchasing Division? g
Answer:
the opportunity cost per unit is $19
Explanation:
The computation of the opportunity cost per unit is shown below:
The opportunity cost per unit is
= Selling price per unit - variable cost per unit
= $34 - $15
= $19
Hence, the opportunity cost per unit is $19
The same should be considered and relevant
We simply deduct the variable cost per unit from the selling price per unit so that the opportunity cost could come
The per-unit opportunity cost of the Selling Division is $19 and the total opportunity cost will be $57,000.
What is an opportunity cost?Opportunity cost refers to the cost of a foregone alternative. It is the profit that can be achieved by choosing another available alternative.
In the given question, the company has two options, either to sell the product in the market or to sell it to the purchasing division.
If the company sells the product to the Purchasing Division, the opportunity cost will be the profit that can be achieved by selling the same in the market.The opportunity cost will be the contribution lost by not selling the product in the market.
The opportunity cost will be:
[tex]\rm Opportunity \:cost = Selling\:price - Variable \:cost\\\\\rm Opportunity \:cost = \$34 - \$15\\\\\rm Opportunity \:cost = \$19[/tex]
The number of units sold to the Purchasing Division is 3,000.
Therefore the total opportunity cost will be:
[tex]\rm Total \:opportunity \:cost = Number \:of\:units \times Opportunity \:cost\:per\:unit\\\\\rm Total \:opportunity \:cost = 3,000 \times \$19\\\\\rm Total \:opportunity \:cost =\$57,000[/tex]
Therefore the opportunity cost is $57,000.
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