Answer:
statement of changes in equity
Mr. Joseph has identified five different companies in which he is interested in investing, however, he has concerns over the economy and wants to invest in companies with the lowest debt exposure. The following is a list of data for the investments:
Company Total Assets Total Liabilities Net Income
A $10,000,000 $1,000,000 $200,000
B 20,000,000 3,000,000 1,000,000
C 6,000,000 4,000,000 250,000
D 15,000,000 6,000,000 1,600,000
E 30,000,000 22,000,000 4,000,000
Required:
Calculate the debt-to-equity ratio and rank the investments base on least risky to most risky.
Answer and Explanation:
The computation is shown below:
Company Total Assets (a) Total Liabilities (b) Net Income Debt to assets ratio (a÷b) Rank
A $10,000,000 $1,000,000 $200,000 0.1 1
B $20,000,000 $3,000,000 $1,000,000 0.15 2
C $6,000,000 $4,000,000 $250,000 0.666667 4
D $15,000,000 $6,000,000 $1,600,000 0.4 3
E $30,000,000 $22,000,000 $4,000,000 0.733 5
Purdum Farms borrowed $17 million by signing a five-year note on December 31, 2017. Repayments of the principal are payable annually in installments of $3.4 million each. Purdum Farms makes the first payment on December 31, 2018 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2018, after the first payment is made
Answer:
6998761626639499r9r9r8ryy
Bottlebrush Company has income from operations of $73,745, invested assets of $245,000, and sales of $1,053,500. Use the DuPont formula to calculate the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round answers to one decimal place. a. Profit Margin fill in the blank 1 % b. Investment Turnover fill in the blank 2 c. Return on Investment
Answer:
a. Profit margin = Income from operations / Sales
Profit margin = $73,745/$1,053,500
Profit margin = 0.07
Profit margin = 7%
b. Investment turnover = Sales/Invested assets
Investment turnover = $1,053,500/$245,000
Investment turnover = 4.3 times
c. Rate of return on investment = Profit margin * Investment turnover
Rate of return on investment = 7% * 4.3
Rate of return on investment = 30.10%
In addition to the $14,000 in expenses, in Nov. 2020, Julie’s Tax Prep paid two years’ worth of office rent ($1,000/month * 24 months = $24,000). The rent covers Nov. 1, 2020 through Oct. 31, 2022. How much of the $24,000 rent can Julie’s deduct in 2020?
Answer:
Julie’s can deduct $2,000 in 2020
Explanation:
In 2020 rents for only two months November 2020 and December 2020 are accrued
First calculate the monthly rent
Monthly rent = Rent paid / Month for which rent paid = $24,000 / 24 months = $1,000 per months
Now calculate the rent deduction to be made by Julie in 2020
Rent deduction 2020 = Numbers of months accrued in 2020 x Monthly rent = 2 months x $1,000 per month = $2,000
Trader Joe's is an American chain of grocery stores headquartered in Monrovia, California. Trader Joe's creates a competitive advantage by its ability to incorporate upscale or attractive attributes into its product offerings at lower costs than rivals. What business strategy is Trader Joe's using to gain its competitive advantage
Answer:
Differentiation focus strategy
Explanation:
Competitive advantage is defined as the factors or strategy that gives a firm an edge over others in the same industry.
They are able to sell more product and make more profit than their competitors.
Trader Joe's creates a competitive advantage by its ability to incorporate upscale or attractive attributes into its product offerings at lower costs than rivals.
They are using differentiation focus strategy which entails developing a unique product based on selected attributes that are widely valued by customers.
Focus is given to making products that specifically meet these needs.
The result is a product that is unique in the industry. Products from Trader Joe's can't be found anywhere else. Also they provide a unique atmosphere and unique interaction with their staff.
They have been able to have reduced pricing through research and other tactics aimed at reducing cost of production in a sustainable manner.
Discuss and develop a theoretical network architecture for a small business in the area that wishes to expand into new facilities, like a colocation center in the downtown area.
Answer:
The responses can be defined as follows:
Explanation:
The placement is essentially a network infrastructure facility in which a company can charge rent for servers as well as other equipment. A company can choose a site to build a server farm. However, one of the key drivers is the operating expenses for the building, maintenance, and updating of a computer system. We acquire and own the hardware (servers) as well as the software to support your presence online with the collocation, and thus are responsible for the correct setup and customization of a two. According to your needs, it may be possible to also buy a computer network or two to control traffic out into your servers (switching, router, firewalls, VPN devices, etc). The cost of the work for business continuity was often used by private companies over the years. Today, cloud providers particularly attractive among cools.
Ad space can be purchased by companies to place advertisements in the form of pop-ups and banners on another company’s websites. Please select the best answer from the choices provided T F
Answer:
true
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The difference between a low-cost provider strategy and a focused low-cost strategy is Multiple choice question. the company's willingness to accept a lower profit margin. the uniqueness of the product or service. the size of the company's targeted buyer group. the length of the value chain.
Answer:
the size of the company's targeted buyer group.
Explanation:
Low cost strategies are used by sellers to gain more patronage of their products. It gives them competitive advantage of having low prices and this will in turn increase sales.
The low-cost provider strategy involves a reduction in prices of all the products a company sells in all locations while still making a profut. An appeal is made to a broad market to attract customers in mass.
The focused low-cost strategy on the other hand involves cost reduction in a targeted niche. It does not appeal to the broad market but rather to a specific customer profile.
So the difference between these two strategies is the size of the company's targeted buyer group.
Group of answer choicesThe horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the cost of debt. The horizon value is calculated by discounting the expected earnings at the WACC. The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the WACC. The horizon value must always be more than 20 years in the future. The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the levered cost of equity.
Answer:
The horizon value is calculated by discounting the free cash flows beyond the horizon date and any tax savings at the WACC
Explanation:
Horizon value
This is simply known as the value of a security. It is regarded as present value usually at future point in time of all cash flows when we stable growth rate is anticipated forever. Its simply known also as present value of all free cash flows beyond the horizon date discounted back to the horizon date. It is also called the terminal value due to it being regarded as end of the explicit forecast period or the continuing value due to the fact that it is the value if operations continue to be used rather than be liquidated.
The growth in free cash flows is usually not constant so modification has to be made to the constant growth formula to find the value of free cash flows beyond the horizon date discounted back to the horizon Formula to calculate horizon value.
Mathematically;
HV = V option at time t =FCFt(1+g)
(WACC-g)
The formula for Terminal Value using the Gordon Growth method includes: Terminal Value = Final Year Free Cash Flow * (1 + Growth Rate) / (Discount Rate - Growth Rate)
Crane Company has old inventory on hand that cost $7500. Its scrap value is $10000. The inventory could be sold for $25000 if manufactured further at an additional cost of $7500. What should Crane do
Answer:
If the company reworks the units, income will increase by $7,500
Explanation:
Giving the following information:
The initial cost should not be taken into account.
Sell as-is:
Selling price= $10,000
Rework:
Additional cost= $7,500
Selling price= $25,000
We need to determine which option is most profitable.
Sell as-is:
Effect on income= $10,000
Rework:
Effect on income= 25,000 - 7,500= $17,500
If the company reworks the units, income will increase by $7,500
Cashan Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 1.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August 24,500 units September 24,700 units October 24,600 units November 26,400 units December 24,500 units
The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $4.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.
The desired ending inventory of Jurislon for September is:_______.
a. $29,640
b. $29,520
c. $44,460
d. $44,280
Answer:
Option d ($44,280) is the correct option.
Explanation:
Given:
Maintain monthly inventory,
= 30%
October production,
= 24,600 units
Rate per kg,
= $4
For September month,
The desired ending units will be:
= [tex]Maintain \ monthly \ inventory\times Production \ in \ October[/tex]
= [tex]30 \ percent\times 24600[/tex]
= [tex]7380 \ units[/tex]
The required quantity will be:
= [tex]1.5 \ kg\times Desired \ ending \ units[/tex]
= [tex]1.5 \ kg\times 7380[/tex]
= [tex]11070 \ units[/tex]
hence,
The total price will be:
= [tex]Rate \ per \ kg\times Required \ quantity[/tex]
= [tex]4\times 11070[/tex]
= [tex]44280[/tex] ($)
An investor purchased on margin Orange Computer for $30 a share. The stock's price subsequently increased to $47 a share at which time the investor sold the stock. The margin requirement is 60 percent and the interest rate on borrowed funds is 7 percent. What would have been the return if the investor had not bought the stock on margin
Answer:
56.67%
Explanation:
Purchase cost = 30 dollars
Margin x price = 0.60x30 = $18
30-18 = $12
Profit = $47 - $30 - 0.07(12)
= 16.16
Percentage earned = (16.16 /18) * 100
= 89.78%
Profit from the trade
= 47-30
= 17
Percentage earned = 17/30 * 100
= 56.67%
The return would have been 56 67% if the investor had not done this.
which of the following is a benefit of search engine marketing
Group of answer choices.
A. Reach out to potential customers actively looking for your product or service
B. Create different types of ad formats to show to potential customers
C. Target people based on their interests and habits
D. SEM is a lot cheaper than any other advertising medium
Answer:
A. Reach out to potential customers actively looking for your product or service
Explanation:
A pre-service strategy refers to the process of planning and analyzing activities that enable a business entity to identify and determine its end users or consumers and the uniquely defined services that will be offered to these customers as they enter into the system. The pre-service strategies includes identifying the following; target market, design, branding, market research.
Search engine optimization (SEO) can be defined as a strategic process which typically involves improving and maximizing the quantity and quality of the number of visitors (website traffics) to a particular website by making it appear topmost among the list of results from a search engine such as Goo-gle, Bing, Yah-oo etc.
This ultimately implies that, search engine optimization (SEO) helps individuals and business firms to maximize the amount of traffic generated by their website i.e strategically placing their website at the top of the results returned by a search engine through the use of algorithms, keywords and phrases, hierarchy, website updates etc.
Search engine marketing (SEM) can be defined as a scalable and an inexpensive form of digital marketing that avails businesses the ability or opportunity to advertise their goods and services using search engine services such as Bing, Go-ogle etc.
Hence, a benefit of search engine marketing (SEM) through search engine optimization is that it helps you to reach out to potential customers actively looking for your product or service.
Compared to physical goods, digital goods have Group of answer choices similar inventory costs. very low costsof delivery. high marginal costs per unit. equivalent marketing costs.
Answer:
Digital Goods
Compared to physical goods, digital goods have
very low costs of delivery.
Explanation:
Digital goods are non-physical goods that are stored, delivered, and used in their electronic formats. They are usually delivered via Email and Internet download. Because of their nature, digital goods do not involve huge costs in physical manufacturing, storage, packing, shipping, and handling costs, unlike physical goods.
The Laffer Curve suggests that multiple choice 1 monetary policy always works in the long run. higher marginal tax rates bring in less revenue. fiscal policy always works in the long run. at some tax rate between 0 and 100 percent, tax revenues are maximized.
Answer:
some tax rate between 0 and 100 percent, tax revenues are maximized.
Explanation:
The Laffer Curve is a supply side economic theory developed by Arthur Laffer in 1974.
The curve depicts the relationship between tax rates and tax revenue
According to this theory, higher income tax rate reduces the incentive of labour to work and invest due to the fact that labour would have to pay higher tax. This means that at some point, increase in the tax rate would decrease government revenue rather than increase it.
The theory submits that there is an optimal tax rate at which tax income is maximised. Once this point is surpassed, increase in tax rate would reduce government revenue
An automobile manufacturing firm decides to meet all its suppliers while planning to manufacture a new automobile that is a minor variant of an existing model in terms of design and performance. The firm wants to provide its loyal customers with automobiles at a low price without compromising on performance. According to authors Crawford and DiBenedetto, this new product falls into the category of ________.
Question Completion With Options:
O price redemptions
O repositionings
O price exemptions
O cost reductions
Answer:
According to authors Crawford and DiBenedetto, this new product falls into the category of ________.
O cost reductions
Explanation:
According to the declared intention of the automobile manufacturing firm, it is working at providing its loyal customers with low-priced automobiles that still maintain competitive performance. Therefore, the new product falls into the category of cost reductions, which is a strategic move to ensure that costs do not drive away customers while the company rakes in huge revenue with increased sales volume.
The financial statements of Apple Inc. in Appendix A contain the following selected accounts, all in thousands of dollars.
Common Stock $35,867
Accounts Payable 49,049
Accounts Receivable 17,874
Selling, General, and Administrative Expenses 15,261
Inventories 4,855
Net Property, Plant, and Equipment 33,783
Net Sales 229,234
Required:
a. What is the increase and decrease side for each account?
b. What is the normal balance for each account?
Answer:
Apple Inc.
a. The increase and decrease side for each account
($'000) Increase Decrease
Side Side
Common Stock $35,867 Credit Debit
Accounts Payable 49,049 Credit Debit
Accounts Receivable 17,874 Debit Credit
Selling, General, and Administrative Expenses 15,261 Debit Credit
Inventories 4,855 Debit Credit
Net Property, Plant, and Equipment 33,783 Debit Credit
Net Sales 229,234 Credit Debit
b. The normal balance for each account
($'000) Normal Balance
Common Stock $35,867 Credit Balance
Accounts Payable 49,049 Credit Balance
Accounts Receivable 17,874 Debit Balance
Selling, General, and Administrative Expenses 15,261 Debit Balance
Inventories 4,855 Debit Balance
Net Property, Plant, and Equipment 33,783 Debit Balance
Net Sales 229,234 Credit Balance
Explanation:
Selected Accounts from Appendix A of Apple' Financial Statements:
($'000)
Common Stock $35,867
Accounts Payable 49,049
Accounts Receivable 17,874
Selling, General, and Administrative Expenses 15,261
Inventories 4,855
Net Property, Plant, and Equipment 33,783
Net Sales 229,234
b) Assets and Expenses increase by debit entries to their accounts, and they decrease by credit entries. They normally have debit balances. On the other hand, Liabilities, Equity, Revenue, and Income normally have credit balances. They increase by credit entries to their accounts and decrease by debit entries.
If someone is engaged in a highly dangerous activity (sky diving or scuba diving), then normally assumption of risk waivers must be signed. Are those waivers always effective, or can you imagine a situation where liability could still be imposed
Answer:
The signing of assumption of risk waivers cannot serve as a substitute to the insurance of liability hence lawsuit can be filed
Explanation:
liability could be imposed by the person engaged in the dangerous activity if the handler of the activity exhibits some form of negligence or discriminatory behaviors or if the material used is substandard.
The signing of assumption of risk waivers cannot serve as a substitute to the insurance of liability hence lawsuit can be filed
Given that the price a stock is bought for is $110 . Based on the one-period valuation model of stock prices, if the stock is sold a year later at the price $120 after receiving a dividend of $2 , then the required rate of return on equity investments is nothing %. (Round your response to the nearest one decimal place.)
Answer:
10.9%
Explanation:
Jose has the personal automobile policy with liability limits as follows: $25,000/$50,000 BI (bodily injury) and $10,000 PD (property damage). Jose is held liable in an accident in which he must pay for bodily injuries as follows: Person A, $10,000, Person B, $30,000. How much his insurance company will pay for this accident
Answer:
$35,000
Explanation:
We need to interpret Jose's insurance policy terms ;
$25000/$50000 ; this means that the maximum amount the policy will pay per injured individual is $25000.
While the maximum amount the policy will pay for all injuries per accident is $50,000
Given that :
Bodily injury to :
person A = $10,000
Person B = $30,000
Since A < 25000 ; policy covers, $10,000
Since B > 25000 ; policy will cover $25000
Amount insurance company will pay :
$(10,000 + 25,000) = $35,000
Williams Company pays each of its two office employees each Friday at the rate of $290 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:
Answer:
Debit Salaries Expense $1,160 and credit Salaries Payable $1,160
Explanation:
Preparation of the month-end adjusting entry to record the salaries earned but unpaid
Based on the above information given the month-end adjusting journal entry to record the salaries earned but unpaid is:
Debit Salaries Expense $1,160
Credit Salaries Payable $1,160
( 2days * 2 workers *$290 per day = $1,160)
(To record the salaries earned but unpaid)
In the long run, an increase in the saving rate a. doesn’t change the level of productivity or income. b. raises the levels of both productivity and income. c. raises the level of productivity but not the level of income. d. raises the level of income but not the level of productivity.
Answer:
b. raises the levels of both productivity and income.
Explanation:
An economy is a function of how money, means of production and resources (raw materials) are carefully used to facilitate the demands and supply of goods and services to meet the unending needs or requirements of the consumers.
Hence, a region's or country's economy is largely dependent on how resources are being allocated and utilized, how many goods and services are to be produced, what should be produced, for whom they are to be produced for and how much money are to be spent by the consumers to acquire these goods and services.
A saving rate can be defined as a measure of the amount of money that an individual, business firm or country deducts from its total disposable income to save over a period of time. It is typically expressed as a percentage or ratio.
Basically, savings are very important for long-term plans and investments.
In the long run, an increase in the saving rate raises both the levels of productivity and income generated by a business firm or a country.
For example, a country that increases its saving rate would also experience an increase in the level of its income, Real gross domestic product (GDP) per person, and productivity in the long-run.
This ultimately implies that, a country with a low saving rate would have a lower productivity and lower Real gross domestic product (GDP) per person, all things being equal (ceteris paribus).
If estimated annual factory overhead is $480,000; overhead is applied using direct labor hours; estimated annual direct labor hours are 200,000; actual March factory overhead is $41,000; and actual March direct labor hours are 17,000; then overhead is:
Answer:
Undeapplied overhead= $200
Explanation:
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 480,000 / 200,000
Predetermined manufacturing overhead rate= $2.4 per DLH
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 2.4*17,000
Allocated MOH= $40,800
Finally, the over/under allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 41,000 - 40,800
Undeapplied overhead= $200
Jaymes Corporation produces high-performance rotors. It expects to produce 69,000 rotors in the coming year. It has invested $8,970,000 to produce rotors. The company has a required return on investment of 20%. What is its ROI per unit
Answer:
$26
Explanation:
The computation of the ROI per unit is shown below
Required ROI on the total Investment
= Total Investment × Required Rate on Investment
= $8,970,000 × 20%
= $1,794,000
So, ROI Per Unit is
= Required Return on investmnt ÷ Total Rotors
= $1,794,000 ÷ 69,000
= $26
The following information is available for Wonderway, Inc., for 2015:
Factory rent $29,600
Company advertising 20,700
Wages paid to laborers 84,000
Depreciation for president's vehicle 8,180
Indirect production labor 1,860
Utilities for factory 30,100
Production supervisor's salary 30,800
President's salary 62,000
Direct materials used 36,200
Sales commissions 7,700
Factory insurance 12,200
Depreciation on factory equipment 26,600
Required:
a. Calculate the direct labor cost for Wonderway.
b. Calculate the manufacturing overhead cost for Wonderway.
c. Calculate the prime cost for Wonderway.
d. Calculate the conversion cost for Wonderway.
e. Calculate the total manufacturing cost for Wonderway.
f. Calculate the period expenses for Wonderway.
Answer: See explanation
Explanation:
a. Calculate the direct labor cost for Wonderway.
This will be the wages paid to laborers which is $84,000.
b. Calculate the manufacturing overhead cost for Wonderway.
Factory rent = $29,600
Add: Indirect production labor = $1,860
Add: Utilities for factory = $30,100
Add: Production supervisor's salary = $30,800
Add: Factory insurance = $12,200
Add: Depreciation on factory equipment = $26,600
Manufacturing overhead cost = $131160.
c. Calculate the prime cost for Wonderway.
Direct materials used = $36,200
Add: Wages = $84,000
Prime cost = $36200 + $84000 = $120200
d. Calculate the conversion cost for Wonderway.
Wages paid to laborers = $84,000
Add: Manufacturing overhead = $131160
Conversion cost = $215160
e. Calculate the total manufacturing cost for Wonderway.
Direct materials used = $36,200
Add: Wages paid to laborers = $84,000
Add: Manufacturing overhead = $131160
Total manufacturing cost = $251360
f. Calculate the period expenses for Wonderway.
Company advertising = $20,700
President's salary = $62,000
Add: Depreciation= $8,180
Add: Sales commissions = $7,700
Period cost = $98580
Morphe Cosmetics agrees to manufacture makeup palettes for Jaclyn Cosmetics. Under the terms of the contract, Jaclyn will pay Morphe a total of $60,000, and Jaclyn can cancel the contract if it so chooses but must pay Morphe for work completed. Morphe believes that, if Jaclyn cancelled the contract, Morphe could sell the palettes to another firm and still make a profit. The manufacturing contract is expected to last six months, and as of December 31, 2021, the job is 80% complete. How much revenue should Morphe recognize in 2021 for this contract
Answer:
the revenue that should be recognized is $48,000
Explanation:
The computation of the revenue that should be recognized is shown below;
= Total price of the contract × Percentage of completion of the contract
= $60,000 × 80%
= $48,000
By multiplying the total contract price with the percentage we can get the revenue recognized
hence, the revenue that should be recognized is $48,000
An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch, Inc. on a firm commitment basis. The investment banker pays $10.50 per share to TWResearch, Inc. for the 10 million shares of stock. It then sells those shares to the public for $11.20 per share.
If the investment bank can sell the shares for $9.75 per share, what is the profit (loss) to the investment banker?
a) Profit of $1,000,000.
b) Loss of $7,500,000.
c) Profit of $7,000,000.
d) Loss of $7,000,000.\
e) Loss of $1,000,000.
Answer: b) Loss of $7,500,000.
Explanation:
The total the investment bank paid when underwriting was:
= 10.50 * 10,000,000 shares
= $105,000,000
The total they then sell to the public is:
= 9.75 * 10,000,000
= $97,500,000
The profit is:
= Selling revenue from public - Buying cost from company
= 97,500,000 - 105,000,000
= -$7,500,000
A manager has determined that a potential new product can be sold at a price of $25 each. The cost to produce the product is $17.5, but the equipment necessary for production must be leased for $75,000 per year. What is the break-even point
Answer:
10,000 units
Explanation:
Calculation to determine the break-even point
Using this formula
Break-even point = Fixed cost / [Selling Price - Cost Price]
Let plug in the formula
Break-even point = $75,000 / [$25 - $17.5]
Break-even point = $75,000 / [$7.5]
Break-even point = 10,000 units
Therefore the break-even point is 10,000 units
Accounting costs and economic costs differ because A) Economic costs include explicit costs and accounting costs do not. B) Accounting costs include explicit costs and economic costs do not. C) Economic costs include implicit costs and accounting costs do not. D) Accounting costs include implicit costs and economic costs do not.
Answer:
C) Economic costs include implicit costs and accounting costs do not.
Explanation:
Economic cost can be calculated as follow
Economic Cost = Explicit cost + Implicit cost
Whereas, the Implicit cost is calculated as follow
Accounting cost = Explicit cost
Hence, the difference between the economic cost and accounting cost is only the implicit cost.
Implicit cost is the opportunity cost.
Economic costs include implicit costs, such as opportunity costs, while accounting costs only consider explicit costs, such as monetary expenses. Therefore, option C is correct.
Economic costs encompass the full measure of costs incurred in pursuing a particular course of action. They extend beyond explicit monetary expenses and include implicit costs, such as opportunity costs. Opportunity costs represent the value of the next-best alternative forgone when making a decision.
Economic costs reflect the total resources and opportunities sacrificed, both explicit and implicit, to undertake a specific activity or venture.
By accounting for both explicit and implicit costs, economic costs provide a more comprehensive assessment of the true cost of a decision or action, considering the value of all foregone opportunities and resources used in the process.
Therefore, option C is correct.
Learn more about Economic costs here:
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Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. (The Norwegian currency is the krone, which is denoted Nkr). The company uses a sob-order costing system arid applies manufacturing overhead cost to jobs on the basis of direct labor-hours. At the beginning of the year, the following estimates were made for the purpose of computing the predetermined overhead rate: manufacturing overhead cost, Nkr360,000; and direct labor-hours, 900. The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials were purchased for use in production, Nkr200,000.
b. Raw materials were requisitioned for use in production (all direct materials), Nkr185,000.
c. Utility bills were incurred, Nkr70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
d. Salary and wage costs were incurred:
Direct labor (975 hours) Nkr230,000
Indirect labor Nkr90,000
Selling and administrative salaries Nkr110,000
e. Maintenance costs were incurred in the factory, Nkr54,000.
f. Advertising costs were incurred, Nkrl36,000.
g. Depreciation was recorded for the year, Nkr95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
h. Rental cost incurred on buildings, Nkrl20,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).
i. Manufacturing overhead cost was applied to jobs, Nkr__?
j. Cost of goods manufactured for the year, Nkr770,000.
k. Sales for the year (all on account) totaled Nkrl,200,000. These goods cost Nkr800,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Raw Materials Nkr30,000
Work in Process Nkr21,000
Finished Goods Nkr60,000
Required:
1. Prepare journal entries to record the preceding data.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above). Determine the ending balances in the inventory accounts and in the Manufacturing Overhead account.
3. Prepare a schedule of cost of goods manufactured.
4. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost Goods Sold. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
6. Job 412 was one of the many jobs started and completed during the year. The job required Nkr8,000 in direct materials and 39 hours of direct labor time at a total direct labor cost of Nkr9,200. The job contained only four units. If the company bills at a price 60% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
Answer:
a. Raw Material Purchases (Dr.) Nkr200,000
Accounts Payable (Cr.) Nkr200,000
b. Work in process (Dr.) Nkr185,000
Raw material (Cr.) Nkr185,000
c. Manufacturing Overhead (Dr.) Nkr63,000
Selling and admin Overheads (Dr.) Nkr7,000
Utility expense (Cr.) Nkr70,000
d. Direct Labor wages (Dr.) Nkr230,000
Indirect Labor wages (Dr.) Nkr90,000
Selling and admin Salaries (Dr.) Nkr110,000
Salaries Expense (Cr.) Nkr 430,000
e. Maintenance expense (Dr.) Nkr54,000
Cash (Cr.) Nkr54,000
f. Advertising expense (Dr.) Nkr36,000
Cash (Cr.) Nkr36,000
g. Depreciation Expense (Dr.) Nkr95,000
Accumulated depreciation (Cr.) Nkr95,000
h. Rent Expense (Dr.) Nkr20,000
Cash (Cr.) Nkr20,000
Explanation:
i. No entry
j. Finished goods (Dr.) Nkr770,000
Cost of goods manufactured (Cr.) Nkr770,000
k. Cash (Dr.) Nkr1,200,000
Sales (Cr.) Nkr1,200,000
