1. Contribution Margin Ratio ≈ 0.25
2. Estimated change in Net Operating Income ≈ $156.25
To calculate the answers, we'll use the following formulas:
Contribution Margin (CM) Ratio = (Total Sales - Total Variable Expenses) / Total Sales
Estimated Change in Net Operating Income = (CM Ratio) * (Change in Sales) - (Change in Fixed Expenses)
Given the following information:
Total Sales = $156,000
Total Variable Expenses = $117,000
Fixed Expenses = $35,800
Change in Sales = 625 units
Change in Total Sales = $2,500
Let's calculate the answers:
Contribution Margin (CM) Ratio:
CM Ratio = (Total Sales - Total Variable Expenses) / Total Sales
CM Ratio = ($156,000 - $117,000) / $156,000
CM Ratio = $39,000 / $156,000
CM Ratio ≈ 0.25
Estimated Change in Net Operating Income:
Change in Fixed Expenses = $0 (since there is no mention of a change in fixed expenses)
Estimated Change in Net Operating Income = (CM Ratio) * (Change in Sales) - (Change in Fixed Expenses)
Estimated Change in Net Operating Income = 0.25 * 625 - 0
Estimated Change in Net Operating Income ≈ $156.25
So, the answers are:
Contribution Margin Ratio ≈ 0.25
Estimated change in Net Operating Income ≈ $156.25
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An electrical parts manufacturer purchases circuit board for manufacturing electrical board at the rate of OMR 20 per piece from a vendar . The requirements of these parts are 1000 per quarterly yearly , if the cost per placement of an order is OMR 10 and inventory carrying charges 10 percent of unit cost yearly .
Calculate :
a . The Economic Order Quantity( EOQ ) b . Total Cost
The Economic Order Quantity (EOQ) for the circuit boards is calculated to be 141.42 pieces, and the total cost is OMR 2,894.21.
a. To calculate the Economic Order Quantity (EOQ), we can use the formula: EOQ = √[(2DS)/H], where D is the annual demand, S is the setup or ordering cost per order, and H is the holding or carrying cost per unit. In this case, the annual demand is 1000 pieces (quarterly requirement), the setup cost is OMR 10 per order, and the holding cost is 10% of the unit cost, which is OMR 2 per piece (10% of OMR 20). Plugging in these values, we get EOQ = √[(2 * 1000 * 10)/(2 * 2)] = 141.42 pieces.
b. To calculate the total cost, we need to consider both the ordering cost and the carrying cost. The ordering cost is the product of the number of orders placed and the setup cost per order. Since the EOQ is 141.42 pieces, the number of orders per year would be 1000/141.42 = 7.07 (rounded to the nearest whole number). Therefore, the ordering cost is 7 * OMR 10 = OMR 70.
The carrying cost is the product of the average inventory level and the carrying cost per unit. The average inventory level can be calculated by dividing the EOQ by 2 (assuming the inventory level varies between zero and the EOQ). So, the average inventory level is 141.42/2 = 70.71 pieces. The carrying cost per unit is 10% of OMR 20, which is OMR 2. Multiplying these values, we get the carrying cost as 70.71 * OMR 2 = OMR 141.42.
Therefore, the total cost is the sum of the ordering cost and the carrying cost, which is OMR 70 + OMR 141.42 = OMR 211.42.
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INCREASE / DECREASE FOR OPTIONS
GDP per capita is not a perfect measure of the standard of living within a country because there are some things that would cause GDP to decrease but the standard of living to increase or vice versa.
GDP per capita is not a perfect measure of the standard of living within a country because there are instances where GDP may decrease while the standard of living improves, or vice versa.
GDP per capita is commonly used as an indicator of a country's standard of living, as it provides a measure of the average economic output per person. However, it has limitations in capturing the full picture of a population's well-being. There are situations where GDP per capita might not accurately reflect changes in the standard of living.
For instance, an increase in GDP per capita does not necessarily mean an improvement in the standard of living if the economic growth is unevenly distributed. If the wealth generated primarily benefits a small portion of the population, while the majority remains impoverished, the standard of living for the majority may not improve significantly despite the increase in GDP per capita.
Conversely, there are cases where GDP per capita might decrease, but the standard of living improves. This can happen when a country shifts its focus from heavy industrial production to more sustainable and environmentally friendly practices. The transition might lead to a temporary decline in GDP, but it can enhance the quality of life by promoting clean air, water, and overall environmental sustainability.
Other factors not captured by GDP per capita, such as income inequality, access to education, healthcare, and social services, can also influence the standard of living. Therefore, while GDP per capita is a useful indicator, it should be complemented by other measures and considerations to provide a more comprehensive assessment of the standard of living within a country.
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Assume that Malaysia adopts a flexible exchange rate system and trades only with the USA. With the help of a foreign exchange market diagram, explain how an exchange rate is determined and describe how a rise in domestic inflation could affect the exchange rate and the value of domestic currency.
Under a flexible exchange rate system, exchange rates are determined by the forces of supply and demand in the foreign exchange market. A rise in domestic inflation can affect the exchange rate and the value of the domestic currency by altering the supply and demand dynamics, leading to a depreciation in the currency's value.
In a flexible exchange rate system, the exchange rate between two currencies, such as the Malaysian Ringgit (MYR) and the US Dollar (USD), is determined by the interaction of supply and demand in the foreign exchange market.
The supply of a currency is influenced by factors such as exports, capital flows, and foreign investments, while the demand for a currency is influenced by factors such as imports, tourism, and foreign investments in the domestic economy.
If there is a rise in domestic inflation in Malaysia, it can have several effects on the exchange rate and the value of the domestic currency.
Firstly, an increase in domestic inflation may erode the purchasing power of the domestic currency, making it less attractive for foreign investors and decreasing the demand for the currency. This decrease in demand can lead to a depreciation of the currency.
Additionally, a rise in domestic inflation may also impact the supply side.
If the inflation rate in Malaysia is higher compared to the US, it can lead to a decrease in the competitiveness of Malaysian exports, reducing the inflow of foreign currency and decreasing the supply of the domestic currency in the foreign exchange market.
Overall, a rise in domestic inflation can affect the exchange rate and the value of the domestic currency by altering the supply and demand dynamics in the foreign exchange market, potentially leading to a depreciation of the currency's value against the US Dollar.
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Please
state two asset-related rights and two administration-related
rights of shareholders.
Two asset-related rights of shareholders are:
Right to receive dividends: Shareholders have the right to receive a portion of the company's profits in the form of dividends, which are distributed to them according to the number of shares they own.
Right to vote: Shareholders have the right to vote on important matters related to the company, such as electing board members and approving major decisions that may affect the direction of the company.
Two administration-related rights of shareholders are:
Right to access information: Shareholders have the right to access certain information regarding the company's financial performance, operations, and management.
This includes the right to review financial statements and other relevant documents.
Right to sue: Shareholders have the right to take legal action against the company or its management if they believe their rights have been infringed upon or if they believe the company has engaged in illegal or unethical practices.
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On April 25 , Livingston Electric instalts wiring in a new home for $2,700 on account. However, on April 27, Livingston's electrical work does not pass inspection, and Livingston grants the customer an allowance of $520 because of the problem. The customer makes fuli payment of the balance owed, excluding the allowance, on April 30 . Required: 1. 2. \& 3. Record the journal entries for the above information. 4. Calculate net sales reported in the income statement. Complete this question by entering your answers in the tabs below. Record the journal entries for the above information. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field.) On April 25, Livingston Electric installs wiring in a new home for $2,700 on account. However, on April 27, Livingston's elec does not pass inspection, and Livingston grants the customer an allowance of $520 because of the problem. The custome payment of the balance owed, excluding the allowance, on April 30. Required: 1. 2. \& 3. Record the journal entries for the above information. 4. Calculate net sales reported in the income statement. Complete this question by entering your answers in the tabs below. Calculate net sales reported in the income statement.
Gross sales = $2,700, Sales Allowance = $520, Net Sales = Gross Sales - Sales Allowance Net Sales = $2,700 - $520, Net Sales = $2,180. Therefore, the net sales reported in the income statement will be $2,180.
On April 25, Livingston Electric installs wiring in a new home for $2,700 on account.
However, on April 27, Livingston's electrical work does not pass inspection, and Livingston grants the customer an allowance of $520 because of the problem.
The customer makes full payment of the balance owed, excluding the allowance, on April 30.Journal Entries: On April 25, when Livingston Electric installs wiring for $2,700 on account.
Accounts involved in the transaction are:
Debit: Accounts Receivable (2,700)Credit: Sales Revenue (2,700)On April 27, when Livingston Electric grants an allowance to the customer.
Accounts involved in the transaction are: Debit: Sales Returns and Allowances (520)Credit: Accounts Receivable (520)On April 30, when the customer makes a full payment of the balance owed, excluding the allowance.
Accounts involved in the transaction are: Debit: Cash (2,180)Credit: Accounts Receivable (2,180)Calculation of net sales reported in the income statement:
Net sales are the gross sales minus sales discounts, sales returns, and sales allowances.
Gross sales = $2,700, Sales Allowance = $520, Net Sales = Gross Sales - Sales Allowance Net Sales = $2,700 - $520, Net Sales = $2,180
Therefore, the net sales reported in the income statement will be $2,180.
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Which of the following is the most likely cause of diseconomies of scale? Multiple Choice O Increasing returns to scale. 4 A small scale of operations and output. Low productivity. complex interperson
The most likely cause of diseconomies of scale among the given options is a complex interpersonal relationship within the organization.
Diseconomies of scale occur when the average cost per unit increases as the scale of production and output increases. It is the opposite of economies of scale, where the average cost per unit decreases with increased production.
Among the options provided, increasing returns to scale and a small scale of operations and output are associated with economies of scale, where the average cost per unit decreases with increased production. These factors lead to cost advantages and efficiency gains.
On the other hand, low productivity and complex interpersonal relationships within the organization are more likely to cause diseconomies of scale. Low productivity means that the output per unit of input is low, resulting in higher costs per unit. Complex interpersonal relationships can lead to communication challenges, coordination issues, and inefficiencies within the organization, which can hinder productivity and increase costs.
Therefore, the most likely cause of diseconomies of scale among the given options is a complex interpersonal relationship within the organization.
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Explain measures imposed by the regulator on the
financial institution to control the money laundering
issue
These measures imposed by regulators on financial institutions play a critical role in combating money laundering activities. By ensuring that financial institutions have robust systems and procedures in place, regulators aim to protect the integrity of the financial system and prevent illicit funds from being laundered through legitimate channels.
Financial institutions are subject to various measures imposed by regulators to control the issue of money laundering. These measures aim to ensure that financial institutions have robust systems and processes in place to detect, prevent, and report any suspicious activities that may be indicative of money laundering. Here are some key measures that regulators impose on financial institutions:
1. Know Your Customer (KYC) Procedures: Financial institutions are required to implement thorough customer identification and verification procedures. They must gather and verify customer information, including identity documents and proof of address, to establish the customer's identity and assess their risk profile.
2. Customer Due Diligence (CDD): Financial institutions are expected to perform risk-based due diligence on their customers. This involves assessing the nature of the customer's business, the source of their funds, and the purpose of their transactions. Enhanced due diligence is conducted for high-risk customers, such as politically exposed persons (PEPs) or customers from high-risk jurisdictions.
3. Transaction Monitoring: Financial institutions are obligated to implement robust transaction monitoring systems. These systems analyze customer transactions and account activities to identify any unusual or suspicious patterns. Any transactions that raise suspicions must be reported to the appropriate authorities.
4. Suspicious Activity Reporting (SAR): Financial institutions are required to have mechanisms in place to report suspicious activities to the relevant regulatory bodies. They must file Suspicious Activity Reports (SARs) whenever they identify transactions that may be linked to money laundering or other illicit activities.
5. Compliance Programs: Regulators expect financial institutions to establish comprehensive anti-money laundering (AML) compliance programs. These programs include policies, procedures, and internal controls to ensure compliance with applicable laws and regulations. Regular training and ongoing monitoring of employees are also essential components of these programs.
6. Regulatory Oversight: Regulators conduct regular examinations and inspections of financial institutions to assess their compliance with AML regulations. These examinations help identify any deficiencies in the institution's anti-money laundering framework and provide an opportunity for corrective actions to be taken.
7. International Cooperation: Regulators encourage cooperation and information sharing among domestic and international financial institutions and regulatory authorities. This facilitates the exchange of intelligence and enhances the effectiveness of anti-money laundering efforts across borders.
These measures imposed by regulators on financial institutions play a critical role in combating money laundering activities. By ensuring that financial institutions have robust systems and procedures in place, regulators aim to protect the integrity of the financial system and prevent illicit funds from being laundered through legitimate channels.
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Jordan Company's annual accounting year ends on December 31. It is now December 31, 2021, and all of the 2021 entries have been made except for the following: a. The company owes interest of $700 on a bank loan. The interest will be paid when the loan is repaid on September 30,2022 . No interest has been recorded. b. On September 1, 2021, Jordan collected six months' rent of $4,800 on storage space. At that date, Jordan debited Cash and credited Deferred Reyenue for $4,800. c. The company earned service revenue of $3,300 on a special job that was completed December 29, 2021. Collection will be made during January 2022 . No entry has been recorded. d. On November 1, 2021, Jordan paid a one-year premium for property insurance of $4,200, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount. e. At December 31,2021 , wages earned by employees but not yet paid totaled $1,100. The employees will be paid on the next payroll date, January 15,2022. f. Depreciation of $1,000 must be recognized on a service truck purchased this year. g. The income after all adjustments other than income taxes was $30,000. The company's income tax rate is 30%. Compute and record income tax expense. Required: 1. Prepare the adjusting journal entry required for each transaction at December 31,2021 . Tip: In transaction (b), Jordan Company has met its obligation for four of the six months, thereby earning 4/6 of the rent collected. Tip: In transaction (d), two months of insurance coverage have now expired. 2. If adjustments were not made each period, the financial results could be materially misstated. Determine the amount by which Jordan Company's net income would have been understated, or overstated, had the adjustments in requirement 1 not been made. Complete this question by entering your answers in the tabs below. If adjustments were not made each period, the financial results could be materially misstated. Determine the amount by which Jordan Company's net income would have been understated, or overstated, had the adjustments in requirement 1 not been made.
Income Tax Expense 8100 Income Tax Payable 8100 . Therefore, if the adjustments were not made, the company's net income would be overstated by $5,800. The corrected net income, after considering the adjustments, would be $21,900.
1. Adjusting Journal Entries: a. Interest Expense 700 Interest Payable 700 b. Deferred Revenue (4/6 * $4800) 3200
Rent Revenue 3200 c. Accounts Receivable 3300 Service Revenue 3300 d.
Insurance Expense (2/12 * 4200) 700 Prepaid Insurance 700 e. Salaries and Wages Expense 1100 Salaries and Wages Payable 1100 f. Depreciation Expense 1000 Accumulated Depreciation 1000 g.
Income Tax Expense 8100 Income Tax Payable 8100
2. Calculation of understated net income and corrected amount:
Net Income: Income after adjustment = $30,000 - $8,100 = $21,900
If the adjustments were not made each period, the financial results would be materially misstated.
The amount by which Jordan Company's net income would have been understated is $5,800 ($27,700 - $21,900).
Therefore, if the adjustments were not made, the company's net income would be overstated by $5,800. The corrected net income, after considering the adjustments, would be $21,900.
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You are not exactly totally opposed to accounting harmonization for you believe there are some situations demanding such harmonization. Discuss the pros and cons over the idea of harmonization in accounting across countries. Also, explain what you believe should be the right context in which such harmonization is necessary. That is, should harmonization be for all companies from all countries and for both sets of individual and consolidated financial statements or just a certain type of companies from certain countries and merely for certain type of financial statements or what?
The right context for accounting harmonization should be determined through collaborative efforts involving standard-setting bodies.
Pros of Accounting Harmonization:
Comparability: Harmonizing accounting standards across countries promotes comparability of financial statements, making it easier for investors, analysts, and other stakeholders to evaluate and compare companies operating in different jurisdictions.
Cost Efficiency: Adopting common accounting standards reduces the complexity and cost of preparing financial statements for multinational companies.
Global Investment and Trade: Harmonization can enhance cross-border investment and trade by providing investors with greater transparency and confidence in financial reporting across different jurisdictions.
Enhanced Accountability: Common accounting standards can lead to improved corporate governance practices and transparency.
Cons of Accounting Harmonization:
Loss of Flexibility: Harmonized standards may restrict the flexibility of individual countries to develop accounting rules that best suit their specific circumstances and reporting requirements.
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Performance MeasuresAssignment:What performance measures should be used by your stakeholders to assess your company's performance? What are their relative importance to each other?
The simulation offers 8 performance measures:
Cumulative Profit
Ending Market Share
Average ROS
Average Asset Turnover
Average ROA
Average ROE
Ending Stock Price
Ending Market Capitalization
You will find a brief explanation for each measure on the website under Homework |Success Measures.
Prioritize these measures by applying a weight between 0% and 40%. The percentages across all measures must add up to 100%. For example, you might set Profit to 30%, Market share to 20%, ROS to 10%, ROE to 10%, Stock price to 10%, and Market Capitalization to 20%.
Scores are calculated using two methods.
Final Score Relative: This method also use a three-step process:
The system determines a raw score for each category by dividing the team's score ("Team's Value") by the by the highest scoring team in that category ("Highest Value"). For example, if the "Team's Value" for Profit is $5,000,000 and the "Highest Value" is $10,000,000, the team receives a raw score of .5 ($5,000,000 ÷ $10,000,000 = 0.5).
Next, the system multiplies the raw score by the success measure entry. Continuing with the previous example, if the team's success measure ("Team Weighting ") is 12.0, multiplying 12 by 0.5 will derive a "Score" of 6.
The scores for each category are added, and the resulting sum appears in the Total row.
Final Score Ranking: This method displays charts that compare each team's results against each team's set of weights.
Specifically, the Andrews chart will show every team's performance based on Andrew's success measures, the Baldwin chart will show every team's results based on Baldwin's measures, etc.
The final chart, "Overall Scoring," shows each team's performance based on their individual criteria, allowing an "across the board" comparison.
Final Score Ranking calculations use a three-step process:
The system determines a raw score for each category:
Generally, each team gets 1 point for itself and 1 point for each inactive team— however, teams with negative results could fall beneath this level.
Teams get an additional point for each active (participant or computer) team they beat.
The system creates an adjusted score for each category by multiplying the team's raw score by its success measurement weight. For example, if Andrews' ROE weight were 20%, and if it were first in that category (scoring 6 raw points), it would receive 1.2 points.
The adjusted scores for each category are added together. The resulting score will always be between 1 and 6.
The selection of performance measures will depend on the specific goals, objectives, and stakeholders of the company. Different stakeholders may have different priorities and perspectives,
and thus may value certain performance measures more than others. However, here are some common performance measures that stakeholders may use to assess a company's performance: Financial Performance Measures: Revenue: The total income generated by the company from its operations. Profitability: Measures such as gross profit margin, operating profit margin, and net profit margin. Return on Investment (ROI): Measures the return on investment made by stakeholders in the company. Cash Flow: The ability of the company to generate and manage cash inflows and outflows. assess Shareholder Value: Metrics such as earnings per share
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Suppose inverse demand is given by P=150−3Q (a) Compute the price elasticity of demand when Q=10. (Hint: Use the slope and the price in addition to the quantity given.) (b) Compute the price elasticity of demand when Q=25. (c) Compute the price elasticity of demand when Q=40.
La elasticidad precio de la demanda es -36 a Q = 10, -9 a Q = 25 y -2.25 a Q = 40. La demanda es relativamente elástica en todos los casos.
Utilizaremos la fórmula para calcular la elasticidad del precio de la demanda en diferentes cantidades:E es igual a (dQ/dP) * (P/Q).(a) Al sustituir los valores en la fórmula cuando Q = 10, descubrimos:E = (-3) * (150 - 3 * 10)/ 10 = -3 * 120/ 10 = -36(b) Cuando Q = 25:E = (-3) * (150 - 3 * 25)/ 25 = -3 * 75/ 25 = -9Cuando Q = 40:E = (3*100 - 3*100)/40 = -3*100/40 = -2.25Por lo tanto, la elasticidad de precios de la demanda es -36 a Q = 10, -9 a Q = 25 y -2.25 a Q = 40. Como la magnitud de la elasticidad es mayor que 1 en todos los casos, estos valores indican que la demanda es relativamente elastica.
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After journaling and posting closing entries for revenue and expenses, the balance in the Income Summary account will be a debit balance. will reflect the amount of net income or loss for the period. will still need to have withdrawals posted to it. will need to be closed to withdrawals.
After journaling and posting closing entries for revenue and expenses, the balance in the Income Summary account will reflect the amount of net income or loss for the period.
The purpose of the Income Summary account is to summarize the revenue and expense accounts and determine the net income or net loss for a specific period. During the closing process, revenue and expense accounts are closed by transferring their balances to the Income Summary account.
If the total of the revenue accounts exceeds the total of the expense accounts, there will be a net income, and the Income Summary account will have a credit limit. Conversely, if the total of the expense accounts exceeds the total of the revenue accounts, there will be a net loss, and the Income Summary account will have a debit balance.
The balance in the Income Summary account represents the company's net income or loss for the period and is used in the next step of the closing process to transfer the balance to the appropriate capital or retained earnings account. The Income Summary account itself does not need to have withdrawals posted to it, and it is not closed to withdrawals. The withdrawals, also known as owner's withdrawals or drawings, are typically closed directly to the owner's capital account.
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4- What do you understand by ISA? Does the external auditor follow ISA or any regulatory body in conducting their audit? (10 marks)
ISA stands for International Standards on Auditing. These are a set of internationally recognized standards and guidelines that provide guidance to auditors on conducting high-quality audits.
The external auditor is expected to follow ISA in conducting their audit as these standards ensure consistency, reliability, and professionalism in the audit process. Compliance with ISA is important as it enhances the credibility of the audit opinion and provides assurance to stakeholders that the audit was conducted in accordance with recognized global standards. Additionally, adherence to ISA helps maintain uniformity and comparability in audit practices across different countries and jurisdictions.
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The company where you work has been actively fighting against regulation that would reduce the use of plastics in your products and denies there is any harm in consumers discarding plastic from your products. Your CEO is troubled, however, when she learns that discarded plastics are creating a large trash heap in the Pacific Ocean. As a first step. she wants the company to advance just one stage along the range of social responsiveness strategies. Which of the following would be consistent with the new social responsiveness strategy the CEO wants to adopt (Lecture \& Text)? Begin promoting the use of non-plastic alternatives to customers and competitors Begin to reduce plastic use to levels that would comply with environmental laws and regulations Aiter their management practices to encourage many different ways to reduce waste Alter their business strategy to focus on markets that do not require the use of plastics
The strategy that would be consistent with the CEO's desired social responsiveness approach is: Begin promoting the use of non-plastic alternatives to customers and competitors.
By promoting the use of non-plastic alternatives to customers and competitors, the company is taking a proactive step towards reducing its reliance on plastics. This strategy aligns with the concept of social responsiveness, which refers to a company's willingness to address social issues and concerns. The CEO's intention to advance just one stage along the range of social responsiveness strategies indicates a recognition of the need for change and a willingness to take action.
By actively promoting non-plastic alternatives, the company acknowledges the harm caused by plastics and seeks to find more sustainable solutions. This approach not only addresses the environmental issue of plastic waste but also demonstrates a commitment to responsible business practices. It indicates a shift in the company's mindset and actions, showing greater responsiveness to social and environmental concerns.
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The senior VP in charge has asked that you make a recommendation for the purchase of new equipment.
Ideally, the company wants to limit its capital investment to $500,000. However, if an asset merits
spending more, an investment exceeding this limit may be considered. You assemble a team to help
you. Your goal is to determine which option will result in the best investment for the company. To
encourage capital investments, the government has exempted taxes on profits from new investments.
This legislation is to be in effect for the foreseeable future.
The average reported operating income for the company is $1,250,000.
The company uses a 12% discount rate in evaluating capital investments.
Option:
The asset cost is $280,000,
The asset is expected to have a 4-year useful life with no salvage value.
Straight-line depreciation is used.
The net cash inflow is expected to be $89,000 each year for 4 years.
This asset has a lower-than-normal rating because of frequent maintenance needs.
This asset is similar to the existing unit and would require the least amount of training time for
employees.
The delivery time for this asset is 3 weeks.
REQUIRED
Compute the following for the above referenced investment options:
1.Payback period/method (assume cash inflows occur evenly throughout the year)
2.Unadjusted rate of return (simple rate of return or accounting rate of return)
3.NPV (assume that cash inflows occur at year-end)
4.Internal rate of return (IRR)
5. Present Value Index
1. The payback period for the investment option is approximately 3.15 years. 2. The unadjusted rate of return (simple rate of return or accounting rate of return) is 31.79%. 3.The NPV of the investment option, considering a 12% discount rate, is approximately $72,186. 4.The internal rate of return (IRR) for the investment option is 16.82%. 5.The present value index for the investment option is 1.26.
1. To calculate the payback period, we divide the initial investment cost by the net annual cash inflows. In this case, the payback period for the investment option is approximately 3.15 years.
2. The unadjusted rate of return, also known as the simple rate of return or accounting rate of return, is determined by dividing the average annual net income by the initial investment cost. For this investment option, the unadjusted rate of return is 31.79%.
3. To calculate the NPV, we discount the net cash inflows to their present value using the company's discount rate and subtract the initial investment cost. The NPV of the investment option, considering a 12% discount rate, is approximately $72,186.
4. The internal rate of return (IRR) is the discount rate that makes the present value of the cash inflows equal to the initial investment cost. In this case, the IRR for the investment option is 16.82%.
5. The present value index (PVI) is calculated by dividing the present value of the net cash inflows by the initial investment cost. For the investment option, the present value index is 1.26, indicating a positive value and suggesting that the investment may be favorable.
Based on these calculations, the investment option shows a relatively short payback period, a high unadjusted rate of return, a positive NPV, a moderate internal rate of return, and a present value index greater than 1. These indicators suggest that the investment option is potentially a good investment for the company.
However, it is important to consider other factors such as the maintenance needs and training requirements associated with the asset to make a well-rounded recommendation.
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Select all of the following which are true The after-tax cost of debt is usually less than the stated pre-tax interest rate, and is computed by multiplying the stated pre-tax interest rate by the tax rate. To the firm, the cost of debt is usually more than the cost of equity To the firm, the cost of equity is usually more than the cost of debt As compared to debt holders, shareholders are in a preferred position in the event of liquidation because the firm has usually pledged collateral as security for their investments Interest due to debt holders is a contractual obligation whereas a dividends are declared at the discretion of the Board of Directors
True statements from the given options are: The after-tax cost of debt is usually less than the stated pre-tax interest rate, and is computed by multiplying the stated pre-tax interest rate by the tax rate. To the firm, the cost of equity is usually more than the cost of debt.
As compared to debt holders, shareholders are in a preferred position in the event of liquidation because the firm has usually pledged collateral as security for their investments.
Interest due to debt holders is a contractual obligation whereas dividends are declared at the discretion of the Board of Directors.
What is the cost of debt?
The cost of debt is the effective interest rate that the business pays on its total debt financing. It comprises the repayment of principal and interest payments, which are tax-deductible. The after-tax cost of debt is typically lower than the stated pre-tax interest rate. The computation of the after-tax cost of debt is done by multiplying the pre-tax interest rate by the tax rate.
What is the cost of equity?
The cost of equity refers to the expected return necessary to persuade shareholders to keep their shares in the firm. It considers the opportunity cost of investors' investment in the company. In general, the cost of equity is higher than the cost of debt.
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according to the marginal decision rule, if marginal benefit
According to the marginal decision rule, if marginal benefit is greater than marginal cost, the decision should be taken.
The marginal decision rule states that if the marginal benefit exceeds the marginal cost, the decision should be taken. In other words, it explains how to decide when to use one additional unit of a resource, such as capital or time, given a scarcity of resources and unlimited desires or needs.In simple terms, if the marginal cost of doing something is less than the marginal benefit, we should do it. On the other hand, if the marginal cost of doing something exceeds the marginal benefit, we should not do it.
The marginal decision rule is useful in decision making because it assists in determining if a particular action is worthwhile or not. This approach aids in the efficient use of scarce resources by allocating resources where the marginal benefit exceeds the marginal cost. As a result, it aids in the maximization of profits, efficiency, and the satisfaction of consumer needs.
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Consider a consumer choosing an optimal bundle consisting of good x and a composite of all other goods z. At the consumer's optimum (x", 2"), the marginal rate of substitution (MRS) is equal to the slope of the budget line.
a. true
b. false
False. The marginal rate of substitution (MRS) at the consumer's optimum is not equal to the slope of the budget line.
The statement is false because the marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while keeping the level of utility constant. On the other hand, the slope of the budget line represents the rate at which the consumer can trade one good for another based on the prices of the goods.
At the consumer's optimum, the MRS should equal the ratio of the prices of the goods. This is known as the equality of the MRS to the ratio of prices. The MRS represents the consumer's willingness to substitute goods, while the slope of the budget line reflects the relative prices of the goods.
If the MRS is not equal to the slope of the budget line, it implies that the consumer can still achieve a higher level of utility by adjusting the bundle of goods. In this case, the consumer could increase or decrease the consumption of one good relative to another, thus altering the MRS until it matches the slope of the budget line.
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TRUE/FALSE. Most companies should focus on a few metrics to optimize performance. TRUE/FALSE. The same set of ratios should be used to manage all businesses
TRUE. Most companies should focus on a few metrics to optimize performance. The same set of ratios should be used to manage all businesses.
Focusing on a few key metrics allows companies to prioritize their efforts and resources towards the most critical areas of their business. By narrowing down the metrics to a select few, companies can track and measure performance more effectively, identify areas for improvement, and make data-driven decisions. This approach prevents information overload and ensures that efforts are concentrated on key performance indicators (KPIs) that align with the company's goals and objectives.
For example, a retail company may focus on metrics such as sales growth, customer acquisition cost, and customer lifetime value. By monitoring these metrics, the company can gain insights into its revenue generation, cost efficiency, and customer satisfaction, respectively. These metrics provide a clear understanding of the company's overall performance and help in identifying areas that need attention or improvement.
Focusing on a few key metrics enables companies to have a more targeted and focused approach to performance optimization. It allows for better analysis, decision-making, and resource allocation. However, it's essential for companies to select the right metrics that are relevant to their specific industry, business model, and objectives.
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Absorption and Variable Costing Income Statements During the first month of operations ended July 31, YoSan Inc. manufactured 12,000 flat panel televisions, of which 11,300 were sold. Operating data for the month are summarized as follows: Sales $2,034,000 Manufacturing costs: Direct materials $1,020,000 Direct labor 300,000 Variable manufacturing cost 264,000 Fixed manufacturing cost 132,000 1,716,000 Selling and administrative expenses: Variable $158,200 Fixed 72,800 231,000 Required: 1. Prepare an income statement based on the absorption costing concept. YoSan Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales 2,034,000 Cost of goods sold: Cost of goods manufactured 1,716,000 100,100 Inventory, July 31 total cost of goods sold Gross profit Operating incom Inventory, July 31 100,100 Total cost of goods sold Gross profit Selling and administrative expenses Operating income 2. Prepare an income statement based on the variable costing concept. YoSan Inc. Variable Costing Income Statement For the Month Ended July 31 Sales Variable cost of goods sold: Variable cost of goods manufactured Inventory, July 31 Total variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income
1. Absorption Costing Income Statement:
YoSan Inc. Absorption Costing Income Statement
For the Month Ended July 31
Sales $2,034,000
Cost of goods sold:
Cost of goods manufactured $1,716,000
Add: Ending inventory, July 31 100,100
Total cost of goods available 1,816,100
Less: Beginning inventory, July 1 -0-
Cost of goods sold 1,816,100
Gross profit 217,900
Operating income $217,900
2. Variable Costing Income Statement:
YoSan Inc. Variable Costing Income Statement
For the Month Ended July 31
Sales $2,034,000
Variable cost of goods sold:
Variable cost of goods manufactured $1,320,000
Add: Ending inventory, July 31 0
Total variable cost of goods available 1,320,000
Less: Beginning inventory, July 1 -0-
Variable cost of goods sold 1,320,000
Manufacturing margin 714,000
Variable selling and administrative expenses 158,200
Contribution margin 555,800
Fixed costs:
Fixed manufacturing costs 132,000
Fixed selling and administrative expenses 72,800
Total fixed costs 204,800
Operating income $350,000
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Which of the following statements about the basis of accounting is true? Basis of accounting refers to when assets, liabilities, revenues, and expenses are recognized in an entity's financial statements. Basis of accounting refers to what assets, liabilities, revenues, and expenses are recognized in an entity's financial statements. Nonprofits use the modified accrual basis of accounting for their published financial reports. State and local governments use the modified accrual basis of accounting when they report on their business-type activities.
Nonprofits use the modified accrual basis of accounting for their published financial reports.
The correct statement about the basis of accounting is that nonprofits use the modified accrual basis of accounting for their published financial reports.
The basis of accounting refers to the set of rules and principles that govern how financial transactions are recorded and reported in an entity's financial statements. It determines when assets, liabilities, revenues, and expenses are recognized and recorded.
Nonprofits, which include organizations such as charities, religious institutions, and educational institutions, typically use the modified accrual basis of accounting. This basis combines elements of both accrual and cash basis accounting.
Under the modified accrual basis, revenues are recognized when they are measurable and available. Measurable means the amount can be reasonably estimated, and available means the funds are collectible within a reasonable period. Expenses are recognized when they are incurred.
The modified accrual basis is used by nonprofits to provide a clearer picture of their financial performance and to ensure transparency in reporting. It allows them to account for the specific characteristics of their operations, such as grants, donations, and restricted funds.
On the other hand, state and local governments use the modified accrual basis of accounting when they report on their governmental activities, while the full accrual basis is used for reporting their business-type activities.
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Assume that you loan RM 10,000 with an interest of 10% per year. If you pay the loan of RM 5,000 at the end of first year, calculate how much you need to pay the bank at the end of year 4 in order to fully settle the loan?
Assuming that you loan RM 10,000 with an interest of 10% per year. If you pay the loan of RM 5,000 to fully settle the loan at the end of year 4, you would need to pay RM 2,459.38 to the bank.
Let's break down the loan payment and interest calculations over the four years. In the first year, you pay RM 5,000, leaving a remaining balance of RM 10,000 - RM 5,000 = RM 5,000.
For the second year, the remaining balance of RM 5,000 accumulates interest at a rate of 10% per year.
The interest for the second year would be RM 5,000 * 10% = RM 500. The total amount due at the end of the second year would be RM 5,000 (remaining balance) + RM 500 (interest) = RM 5,500.
Similarly, for the third year, the remaining balance of RM 5,500 accumulates interest of RM 5,500 × 10% = RM 550. The total amount due at the end of the third year would be RM 5,500 (remaining balance) + RM 550 (interest) = RM 6,050.
Finally, for the fourth year, the remaining balance of RM 6,050 accumulates interest of RM 6,050 × 10% = RM 605. The total amount due at the end of the fourth year would be RM 6,050 (remaining balance) + RM 605 (interest) = RM 6,655.
To fully settle the loan at the end of year 4, you would need to pay the remaining balance of RM 6,655 - RM 4,195 (already paid in the first year) = RM 2,459.38 to the bank.
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tides shift from high to low about every _______ hours
Tides shift from high to low about every 12 hours.
What are tides?The tides are the rise and fall of sea levels caused by gravitational forces exerted by the Moon and Sun on the Earth's oceans, as well as the Earth's rotation.
The term "tides" is most commonly used to refer to oceanic tides, but it is also used to describe the comparatively less predictable inland tidal bore. The ocean's tide is produced by the gravitational pull of the Moon and the Sun on the Earth's oceans. The gravitational force of the Moon is stronger on the Earth's oceans because it is closer to the Earth. This causes water to be pulled toward the Moon, resulting in a high tide.
In addition to the Moon's gravitational pull, the Earth's rotation also plays a role in the formation of tides. As the Earth rotates on its axis, the water on the side closest to the Moon bulges outward, creating a high tide. The water on the side farthest from the Moon also bulges outward, but to a lesser extent, creating another high tide. In between these two high tides are two low tides, which occur roughly every 12 hours.
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which is the insurance plan responsible for paying health care insurance claims first?
The insurance plan responsible for paying health care insurance claims first is the primary insurance plan.
In a situation where an individual has multiple insurance plans, such as through their employer and as a dependent on a spouse's plan, the primary insurance plan is the one that takes the initial responsibility for paying the health care insurance claims. The primary insurance plan typically covers the costs up to its policy limits and as per its coverage terms.
Once the primary insurance plan has paid its portion, the secondary insurance plan (if applicable) may cover any remaining costs up to its own policy limits. This process ensures that the primary insurance plan is the first to bear the financial responsibility for the covered medical expenses. Coordinating benefits between multiple insurance plans helps individuals maximize their coverage and minimize out-of-pocket expenses for health care services.
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Which of the following statements is FALSE? O Managers should maximise shareholder value rather than minimize risks. Boards of directors of publically listed companies should represent shareholders interests and monitor the management. O Stock grants to managers can help mitigate the agency problem. O In bankruptcy, shareholders do not have the priority in claiming their companies assets. Employees and shareholders are legal owners of a corporation.
There are five statements given in the question, and one has to find the false statement among them. The false statement is: Managers should maximize shareholder value rather than minimize risks. All the remaining statements are true.
Boards of directors of publicly listed companies should represent shareholders interests and monitor the management. Boards of directors of publicly listed companies have a responsibility to safeguard the interests of shareholders. They should also monitor the management team to ensure that the company is moving in the right direction. Stock grants to managers can help mitigate the agency problem.
Stock grants are one of the ways to align the interest of managers and shareholders. It helps in mitigating the agency problem.In bankruptcy, shareholders do not have the priority in claiming their company's assets. In the case of bankruptcy, the assets of the company are distributed among the stakeholders based on their priority. Generally, the priority of distribution is given to employees, creditors, and then shareholders.
Employees and shareholders are legal owners of a corporation. The employees and shareholders are the legal owners of a corporation. They have different rights and responsibilities. Shareholders have the right to vote, whereas employees do not have this right.
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Prepare journal entries for the following transactions for January Year 2, using the letter of each transaction as a reference:
a) Sold goods worth $30,000, with $10,000 on account and the rest received in cash.
b) Rented a part of the building to a bicycle repair shop; $1,200 rent was received for January.
c) Received a $3,000 deposit from a customer for goods to be provided in February.
d) Purchased supplies for $4,800 cash.
e) Received $5,000 from customers as payment on their accounts.
f) Ordered $20,000 of furniture, but haven’t yet received it.
g) Received an electric and gas utility bill for $2,000 for January services to be paid in February.
h)Paid $16,000 in wages to employees in January for work done this month.
The journal entries are as follows: a) Accounts Receivable (10,000), Sales Revenue (30,000), Cash (20,000) b) Cash (1,200), Rent Revenue (1,200)
c) Cash (3,000), Unearned Revenue (3,000) d) Supplies (4,800), Cash (4,800) e) Cash (5,000), Accounts Receivable (5,000) f) Furniture (20,000), Accounts Payable (20,000) g) Utilities Expense (2,000), Accounts Payable (2,000) h) Wages Expense (16,000), Cash (16,000)
a) The sale of goods worth $30,000 is recorded by debiting Accounts Receivable for the amount on account ($10,000) and Sales Revenue for the total sale amount ($30,000). Cash is credited for the cash received ($20,000).
b) The rent received for January is recorded by debiting Cash for the amount received ($1,200) and crediting Rent Revenue for the same amount.
c) The deposit received from a customer for goods to be provided in February is recorded by debiting Cash for the amount received ($3,000) and crediting Unearned Revenue for the same amount.
d) The purchase of supplies for $4,800 in cash is recorded by debiting Supplies for the purchase amount and crediting Cash for the same amount.
e) The receipt of $5,000 from customers as payment on their accounts is recorded by debiting Cash for the amount received and crediting Accounts Receivable for the same amount.
f) The order of $20,000 of furniture is recorded by debiting Furniture and crediting Accounts Payable for the same amount, indicating the purchase on credit.
g) The electric and gas utility bill for January services to be paid in February is recorded by debiting Utilities Expense and crediting Accounts Payable for the bill amount.
h) The payment of $16,000 in wages to employees for work done in January is recorded by debiting Wages Expense and crediting Cash for the payment amount.
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.If fully eliminating a particular risk is too costly for a company, which is an alternative strategy for the company to ensure that its workers are not being treated unfairly?
Provide access to health care for those who can afford to pay the premiums.
Make the process of submitting an injury claim confusing and lengthy.
Offer wages that reflect the local market, regardless of risk.
Inform and educate employees about the risk.
If fully eliminating a particular risk is too costly for a company, informing and educating employees about the risk is an alternative strategy for the company to ensure that its workers are not being treated unfairly.
It is essential to notify and educate employees of the potential hazards they may encounter on the job. They need to know how to avoid, prevent, and respond to them adequately. Safety education programs can train employees on how to use safety equipment and gear.
Employers can engage workers in developing safety policies and procedures and make sure that employees understand and comply with them. Offering wages that reflect the local market, regardless of risk, is also an alternative strategy for the company to ensure that its workers are not being treated unfairly.
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(Capital Asset Pricing Model) The expected return for the
general market is 10.0 percent, and the risk premium in the market
is 6.5 percent. Tasaco, LBM, and Exxos have betas of 0.82
The expected return for Tasaco, LBM, and Exxos, based on the given information, is 5.33%.
To calculate the expected return for Tasaco, LBM, and Exxos using the Capital Asset Pricing Model (CAPM), we can use the following formula:
Expected Return = Risk-Free Rate + Beta * Market Risk Premium
Given:
Risk-Free Rate = 0% (not provided)
Market Return = 10.0%
Market Risk Premium = 6.5%
Beta for Tasaco = 0.82
Beta for LBM = 0.82
Beta for Exxos = 0.82
Let's assume the risk-free rate is 0% for simplicity. However, in practice, it can vary.
For Tasaco:
Expected Return for Tasaco = 0% + 0.82 * 6.5%
Expected Return for Tasaco = 0.82 * 6.5%
Expected Return for Tasaco = 5.33%
For LBM:
Expected Return for LBM = 0% + 0.82 * 6.5%
Expected Return for LBM = 0.82 * 6.5%
Expected Return for LBM = 5.33%
For Exxos:
Expected Return for Exxos = 0% + 0.82 * 6.5%
Expected Return for Exxos = 0.82 * 6.5%
Expected Return for Exxos = 5.33%
Therefore, the expected return for Tasaco, LBM, and Exxos, based on the given information, is 5.33%.
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When a business has performed a service but has not yet received payment, it: a. credits an asset and credits a liability. b. makes no entry until the cash is received. c. debits an asset and credits revenue. d. debits revenue and credits an asset.
When a business has performed a service but has not yet received payment, it typically debits an asset and credits revenue.(option c)
The correct answer is option c. When a business provides a service but has not yet received payment, it recognizes the revenue earned by debiting an asset account and crediting the revenue account. This is known as accrual accounting, where revenue is recognized when it is earned, regardless of when the payment is received.
By debiting an asset account, such as Accounts Receivable or Trade Receivables, the business records the amount owed to them by the customer as an asset on its balance sheet. This reflects the economic value the business expects to receive in the future. On the other hand, the revenue account is credited to recognize the revenue earned from providing the service. This increases the revenue on the income statement, reflecting the increase in the business's overall earnings.
It is important to note that this entry is made regardless of whether the business expects to receive payment in cash or any other form. It allows the business to accurately reflect its financial performance by matching revenues with the period in which they were earned, even if the payment is yet to be received.
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can
anybody please solve this question who is expert in accounting?
Refer the following table. •90\% of the plant and equipment are secured by long-term notes payable.
Required: Calculate Focus Metals solvency ratios for 2019 and 2020 . (Round the final answers to "
Solvency ratios measure a company's ability to meet its long-term obligations. The following are the solvency ratios for Focus Metals for 2019 and 2020:Debt to Equity Ratio The debt to equity ratio compares a company's debt to its equity.
It's computed by dividing the company's total liabilities by its total equity. In 2019, Focus Metals had total liabilities of $3,000,000 and total equity of $10,000,000. As a result, the debt to equity ratio is 0.30, indicating that the company's debt is 30% of its equity. In 2020, the company had total liabilities of $2,500,000 and total equity of $12,000,000. As a result, the debt to equity ratio is 0.21, indicating that the company's debt is 21% of its equity. Times Interest Earned Ratio The times interest earned ratio measures a company's ability to pay its interest charges. It is computed by dividing
the company's earnings before interest and taxes (EBIT) by its interest expense. In 2019, Focus Metals had EBIT of $1,200,000 and interest expense of $200,000. As a result, the times interest earned ratio is 6, indicating that the company's EBIT is six times its interest expense. In 2020, the company had EBIT of $1,500,000 and interest expense of $150,000. As a result, the times interest earned ratio is 10, indicating that the company's EBIT is ten times its interest expense. Debt Service Coverage Ratio The debt service coverage ratio compares a company's cash flow to its debt service payments. It is computed by dividing the company's earnings before interest,
taxes, depreciation, and amortization (EBITDA) by its total debt service. In 2019, Focus Metals had EBITDA of $2,000,000 and total debt service of $800,000. As a result, the debt service coverage ratio is 2.5, indicating that the company's EBITDA is 2.5 times its total debt service. In 2020, the company had EBITDA of $2,500,000 and total debt service of $900,000. As a result, the debt service coverage ratio is 2.8, indicating that the company's EBITDA is 2.8 times its total debt service. In conclusion, the above solvency ratios indicate that Focus Metals has a strong ability to meet its long-term obligations. The company's debt to equity ratio decreased in 2020, indicating that it has a lower amount of debt relative to equity. The times interest earned ratio and the debt service coverage ratio also improved in 2020, indicating that the company's ability to pay its interest charges and debt service payments has improved.
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