Answer: Aggressive approach
Explanation:
With an Aggressive approach to financing, the management is trying to take advantage of the fluctuations in interest rates by using short term loans to finance some parts of fixed assets as well as current assets. This is what is happening here so the management must be using aggressive financing.
This is unlike the conservative approach where fixed assets are financed with long term financing like stocks and bonds with the logic being that both of them have similar lifetimes and so will supply adequate cashflow for the payment of interest overtime.
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
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%
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.
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
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 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
Net Zero Products, a wholesaler of sustainable raw materials. Prepared the following aging of receivables analysis. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 115,200 $ 80,000 $ 18,000 $ 7,200 $ 4,000 $ 6,000 Percent uncollectible 1 % 3 % 5 % 8 % 11 % 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 credit.
Answer:
Net Zero Products
1. The balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method is:
= $2,680.
2. The Adjusting Entry:
Debit Bad Debts Expense $1,680
Credit Allowance for Doubtful Accounts $1,680
To record bad debts expense and to bring the balance of the Allowance for Doubtful Accounts to a credit balance of $2,680.
Explanation:
a) Data and Calculations:
Days Past Due Total Percent Amount
AR Uncollectible Uncollectible
0 $80,000 1 % $800
1 to 30 $18,000 3 % 540
31 to 60 $7,200 5 % 360
61 to 90 $4,000 8 % 320
Over 90 $6,000 11 % 660
Total $ 115,200 $2,680
Allowance for Doubtful Accounts:
Unadjusted balance = $1,000
Adjusted balance 2,680
Bad Debts Expense = $1,680
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
The cost of preferred stock is different from the cost of _____ because there is no maturity date on which principal must be paid.
Answer:
debt
Explanation:
One of the cheapest source used by organizations to finance their businesses after financing a debt they incurred is preferred stock.
Cost of preferred stock can be defined as the rate or price that a company pays their investors in return for the income generated through the issuance and sales of its stocks.
Generally, the cost of preferred stock is different from the cost of debt because there is no maturity date on which principal must be paid by the company to the investors.
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
Lucy has decided to save for a vacation in 18 months. She will save the money into a short-term investment account returning 4% annually. How much will she have to put away at the beginning of each month if the vacation cost is $15,000
Answer:
Monthly deposit= $810.20
Explanation:
Giving the following information:
Number of periods (n)= 18 months
Interest rate (i)= 0.04/12= 0.0033
Future value (FV)= $15,000
To calculate the monthly deposit, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (15,000*0.0033) / [(1.0033^18) - 1]
A= $810.20
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
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
A total materials variance is analyzed in terms of quantity and quality variances. tight and loose variances. price and quantity variances. buy and sell variances.
Answer:
price and quantity variances.
Explanation:
In Financial accounting, costing is the measurement of the cost of production of goods and services by assessing the fixed costs and variable costs associated with each step of production.
Manufacturing costs can be defined as the overall costs associated with the acquisition of resources such as materials and the cost of converting these raw materials into finished goods. Manufacturing costs include direct labor costs, direct materials cost and manufacturing overhead costs.
Total direct materials variance gives the difference between the budgeted cost and actual cost of a unit of goods produced.
Generally, a total materials variance is analyzed in terms of price and quantity variances used by a manufacturer in the manufacturing of a particular product.
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
Flagstaff Company has budgeted production units of 9,000 for July and 9,200 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $22 per hour. The total cost of direct labor budgeted for the month of August is:
Answer:
the total cost of direct labor budgeted for the month of August is $101,200
Explanation:
The computation of the total cost of direct labor budgeted is shown below:
Direct labor cost is
= 9,200 × .50 hours × $22 per hour
= $101,200
Hence, the total cost of direct labor budgeted for the month of August is $101,200
The same should be relevant
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
Product G10 used the following quantity of activity drivers to produce 100 units of final product: 12 setups 22 material moves, and 32 machine hours. The total ABC cost and unit ABC cost assigned to Product G10 is:
Complete Question:
Ace, Inc. has three activity pools which have the following costs: Machine setups $15,000 Material moves $22,000 Machine operations $14,000 The activity cost drivers (and driver quantity) for the three pools are, respectively, number of setups (100), number of material moves (220), and number of machine hours (175). Product G10 used the following quantity of activity drivers to produce 100 units of final product: 12 setups, 20 material moves, and 32 machine hours. The total ABC cost and unit ABC cost assigned to Product G10 is: Select one: A. $3,630 total ABC cost and $36.30 unit ABC cost B. $10,300 total ABC cost and $103. unit ABC cost C. $6,360 total ABC cost and $63.60 unit ABC cost D. $3,300 total ABC cost and $330 unit ABC cost
Answer:
Ace, Inc.
The total ABC cost is:
= $6,560 and
Unit ABC cost assigned to Product G10 is:
= $65.60.
Explanation:
a) Data and Calculations:
Activity Pools Costs Cost Drivers Activity Rate
Machine setups $15,000 number of setups (100) $150/setup
Material moves $22,000 number of material moves (220) 100/move
Machine operations $14,000 number of machine hours (175) 80/m.hr
Product G10
Number of units produced = 100
Machine setups cost = $1,800 (12 * $150)
Material moves cost = 2,200 (22 * $100)
Machine operations cost 2,580 (32 * $80)
Total ABC cost = $6,560
Unit ABC cost = $65.60 ($6,560/100)
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 now 20 years of age and decide to save $100 at the end of each month until you are 65. If the interest rate is 9.2%, how much money will you have when you are 65?
Answer:
FV= $804,326.91
Explanation:
Giving the following information:
Monthly deposit (A)= $100
Interest rate (i)= 0.092/12= 0.0077
Number of periods= 45*12= 540 months
To calculate the future value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
FV= {100*[(1.0077^540) - 1]} / 0.0077
FV= $804,326.91
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
In the liquidation of a partnership, any gain or loss on the realization of noncash assets should be allocated Group of answer choices first to creditors and the remainder to partners. to the partners on the basis of their capital balances. to the partners on the basis of their income-sharing ratio. only after all creditors have been paid.
Answer:
to the partners on the basis of their capital balances.
Explanation:
When the partnership is liquidated so any gain or loss that should be realized on non-cash asset should be distributed to the partners based on their capital balances. As at the time of gain or loss the sale of the non-cash assets should be distributed to the partners at their profit sharing ratio
therefore as per the given situation, the above represent the answer
IF COUNTRIES FIND WAYS OF IMPROVING THEIR FACTOR OF PRODUCTIVITY
Answer:
THEIR FACTOR OF PRODUCTIVITY will increase.
Select financial statement data for two recent years for Davenport Company are as follows:
20Y5 20Y4
Sales $1,776,000 $1,020,000
Fixed assets: Beginning of year 720,000 640,000
End of year 760,000 720,000
a. Determine the fixed asset turnover ratio for 20Y4 and 20Y5. Round to one decimal place.
20Y5 20Y4
Fixed Asset Turnover Ratio
b. Does the change in the fixed asset turnover ratio from 20Y4 to 20Y5 indicate a favorable or an unfavorable change?
Answer:
20Y5 = 2.4
20Y4 = 1.5
It is favourable
Explanation:
Fixed asset turnover = revenue / average net fixed assets
Average fixed asset =( fixed asset at the beginning of year + fixed asset at the end of year) / 2
20y5 = (720,000 + 760,000) / 2 = 740,000
20y4 = (720,000 + 640000) / 2 = 680,000
Fixed asset turnover = $1,776,000 / 740,000 = 2.4
$1,020,000 / 680,000 = 1.5
the higher the ratio, the better for a firm. it means that less fixed asset is generating higher revenues
A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 5% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years
Answer:
Zero-cupon bond= $1,286
Explanation:
Giving the following information:
Interest rate= 5%
Face value= $1,900
Years to maturity= 8 years
To calculate the value of the bond, we need to use the following formula:
Zero-cupon bond= [face value/(1+i)^n]
Zero-cupon bond= [1,900 / (1.05)^8]
Zero-cupon bond= $1,286
Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $7.00 per bottle which is expected to decrease sales by 20%. If the price is raised, the number of units that must be sold to keep the profits unchanged is
Answer:
131,250= number of units
Explanation:
Giving the following information:
We need to calculate the number of units to be sold to maintain a profit of $175,000.
Unitary variable cost= $3
Fixed expenses= $350,000
Selling price= $7
Net income= total contribution margin - fixed cost
175,000= number of units*(7 - 3) - 350,000
525,000 = number of units*4
525,000 / 4= number of units
131,250= number of units
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.
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
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
