Answer: D. 15%
Explanation:
Beta is given as 1.6 but is calculable by the formula;
Beta = Correlation Coefficient of stock with market returns * [tex]\frac{Standard Deviation of stock returns}{Standard Deviation of market returns}[/tex]
1.6 = 0.8 * 30%/Sdm
30% /Sdm = 1.6/0.8
30% / Sdm = 2
Sdm * 2 =30%
Sdm = 30%/2
Sdm = 15%
Using the information below for Laurels Company; determine the cost of goods manufactured during the current year: Direct materials used $6,100 Direct Labor 8,100 Total Factory overhead 6,200 Beginning work in process 4,100 Ending work in process 6,200a. $19,700b. $16,900c. $18,300d. $12,800e. $14,800
Answer:
c. $18,300
Explanation:
The computation of cost of goods manufactured during the current year is shown below:-
Cost of goods manufactured during the current year = Direct material + Direct labor + Total factory overhead + Beginning Work in progress - Ending work in progress
= $6,100 + $8,100 + $6,200 + $4,100 - $6,200
= $24,500 - $6,200
= $18,300
Hence, the correct option is c. $18,300
Kelley Company reports $1,250,000 of net income for 2017 and declares $175,000 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 380,000 weighted-average shares of common stock. 1. What amount of net income is available to common stockholders for 2017
Answer:
Net Income available to common stockholders = $1075000
Explanation:
The preferred stock holders have a preference over the common stockholders in the distribution of dividends as they are paid before the common stock holders and receive a fixed amount of dividend. However, the net income that is available to common stock holders is all the net income that is left after deducting the preferred stock dividend from it.
Thus, the net income available to common stockholders can be calculated as,
Net Income available to common stockholders = Net Income - Preferred stock dividend
Net Income available to common stockholders = 1250000 - 175000
Net Income available to common stockholders = $1075000
On January 1, 2018, Lizzy's Lemonade issues 5%, 20-year bonds with a face amount of $81,000 for $71,638, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2018, the first interest payment date
Answer:
The amount of $2,149.14 will be recorded on June 30, 2018 , the first interest payment date.
Explanation:
The data below were extracted from the above information
Face amount $81,000
rate 5%
Issue price $71,638
Yield 6%
Since we already know that interest is paid semi annually, then ;
Amount of interest expense will be = issue price × yield
= $71,638 × 6% × 1/2
= $2,149.14
Amount of interest expense is therefore $2,149.14, to be recorded on June 30, 2018, the first interest payment date.
Research an organization that makes people their primary focus and another organization that makes productivity and efficiency their primary focus. Compare, contrast, and discuss the control techniques and measurements for each organization.
Answer:
Ritz Carlton hotel focuses on people.
Sony Focuses on their products.
Explanation:
Ritz Carlton has created its leading brand by providing great ambiance to the visitors and its guest. One can dream of staying at such luxury hotel. They are famous for their hospitality of their guests. The hotel management believes on total quality management. It has set highest standard for themselves and strive to meet them by providing better and better service to its guests. The success of Ritz Carlton is mainly because they keep the comfort of their guests as their highest priority.
Sony has always been striving to serve its customer better. Millennial are the top brands that are considered in market. They are the organizations which capture major market share and are massive market segment. Sony has offered wide range of products to its customers. Their main focus is on their product features and its qualities.
All of the following statements concerning the characteristics of aggregate planning for services is true except
A. Group of answer choices
B. Demand is difficult to predict
C. Most services can be inventoried
D. Capacity is easy to predict
E. Labor is the most constraining resource
Answer: D. Capacity is easy to predict
Explanation:
Aggregate planning for services involves organising the business areas of companies engaging in service provision or operation companies that also provide a service.
It is generally held that demand is difficult to predict and most services can be inventoried. It is also held that labor is the most constraining resource.
However, capacity in aggregate planning for services is not easy to predict. This is because services are not standadized and are instead varied and mostly unique. Therefore knowing the capacity to give to a service becomes hard to predict.
Activity-Based Costing: Selling and Administrative Expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of $20 per sales order, and the customer return activity has an activity rate of $100 per return. Jungle Junior sold 2,500 swing sets, which consisted of 750 orders and 80 returns.
Required:
a. Determine the total sales order processing and customer return activity cost for swing sets.
b. Determine the per-unit sales order processing and customer return activity cost for swing sets. Round your answer to the nearest cent.
Answer: 1}ToTAL Activity cost =$23,000
2a) Sales order Processing Activity per unit sale=$6.00
2b)customer return activity per unit sale=$3.20
Explanation:
a. total sales order processing and customer return activity cost for swing sets
Sales order Processing Activity =Number of orders x rate per sales order
=750 x 20 = $15,000
customer return activity = Number of returns x rate per return
= 80 x 100= $8,000
ToTAL Activity cost = Sales order Processing Activity +customer return activity= $15,000 + $8000 = $23,000
b)per-unit sales order processing and customer return activity cost for swing sets
Cost of Sale order processing = $15,000
Number of swing set sold = 2,500
Therefore Sales order Processing Activity per unit sale = Cost of Sale order processing/ Number of swing set sold = $15,000/ 2,500= $6.00
customer return activity cost = $8,000
Number of swing set sold = 2,500
Therefore customer return activity per unit sale= customer return activity cost / Number of swing set sold = $8,000/ 2,500= $3.20
ToTAL Activity cost per unit sale = Sales order Processing Activity cost per unit +customer return activity cost per unit = $6.00 + $3.20 = $9.20
Exercise 11-4 Stock issuance for noncash assets LO P1 Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.
Answer and Explanation:
The Journal entry is shown below:-
Land $45,000
Building Dr, 85,000
To Common Stock $49,000 (7,000 shares × $7)
To Paid-in capital in excess of par-Common stock $81,000
(Being issuance of the stock in exchange for the land and building is recorded)
Here we debited the land and building as it increases the assets and we credited the common stock and paid in capital in excess of par-common stock as it also increases the liabilities.
Due Diligence refers to diligently monitoring the interview for lies or half-truths the interviewee might include. Select one: True False
Answer: False
Explanation:
Due diligence is a review, audit or an investigation that is performed in order to confirm certain facts. Due diligence also involves looking at the financial records of w company before having a transaction with the company in order to ascertain some facts.
Due Diligence is not diligently monitoring the interview for lies or half-truths the interviewee might include. This is false.
Denise contracts with Long Life Insurance Co., agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies. Barn is a(n):
Answer:
Donee Beneficiary
Explanation:
In the scenario being described, it can be said that Barn is a Donee Beneficiary. This is a third-party beneficiary that occurs when the second party in the contract does not owe anything to the third party but wants to provide them with the benefit of the performance of the first party. Which since in this scenario, Denise wants to provide Barn with all the benefits of the contract even though she does not owe him anything, then it technically makes Barn a Donee Beneficiary to the Long Life Insurance Contract.
Conventional wisdom says one should measure a manager's investment performance over an entire market cycle. What arguments support this contention? What arguments contradict it?
Answer:
In every form of analysis, it is always safer to take a macro or holistic view of the situation. This is true for the investment performance of a manager. One investment decision that went right does not suffice to classify an investment portfolio manager as proficient, neither is one that went south enough to tag him deficient.
The forecasting ability of managers, on the balance of probability, will vary for different cases, with a helicopter view of providing a more accurate measure of their performance.
However, if it was possible to analyse the market for volatility and adjust our forecasts it becomes unnecessary to look at and analyse all the information from a 12-month cycle before coming to terms about the performance of the manager.
Cheers!
Three phenomena that tend to bias the expected completion time of projects are inflated time estimates, activity time variability with path interdependencies, and resource dependence.
a. True
b. False
Answer: True
Explanation:
The expected completion time of a project is determined when the duration of every activity that takes place on the critical path is established.
Three phenomena that tend to bias the expected completion time of projects are inflated time estimates, activity time variability with path interdependencies, and resource dependence.
Irene’s Dairy is deciding whether or not to enter the market for ice cream, currently monopolized by Mattie’s Ice-cream. If it enters the market, Mattie’s can either accommodate him and share his 10million in profits equally with Irene or fight him and cause a 5million loss for each in a price war. What would the profits be for Mattie’s Dairy if Irene does not enter the market?
Answer:
"Threaten to always accommodate" is the correct choice.
Explanation:
As we acknowledge accommodation seems to be the phase wherein we change current understanding in anything other than a sense that new information of interest is integrated. And then we can tell whether Mattie won't try to compromise Irene and will therefore surely consider to "intimidate to accommodate" Irene throughout all times. Accommodate means, for example, introducing a piece of different information about what another person asks mother in some kind of a railway station what it's really. Mother says this is train and starts running on what seems like a device like buses running on roadways.Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance of losing 6%. What is your expected return on this investment
Answer:
9.2%
Explanation:
expected return of the investment = potential return x chance of each return happening
Expected return of the investment:
20% chance of occurring x 30% potential return = 0.2 x 30% = 6%50% chance of occurring x 10% potential return = 0.5 x 10% = 5%30% chance of occurring x -6% potential return = 0.3 x -6% = -1.8%total expected return = 9.2%EHealth Corporation has $1,000 par value bonds with 4 years to maturity. The bonds pay an 8% coupon rate with semi-annual coupon interest payments. The bond's closing price is quoted at 103.75. Suppose you purchase the bond for the closing price. What is the bond's yield to maturity?
Answer:
Yield to Maturity(YTM) = 3.47%
Explanation:
The yield to maturity is the required rate of return (discount rate) that would equate the price of the bond and cash outflow expected from the bond. The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- coupon
F- Face Value
P- Current Price
DATA
Coupon = coupon rate × Nominal value = 1,000 × 8%× 1/2=40(note we divide by 2 because interest is paid semi-annually)
n= 4×2 = 8 (note there 2 half months in a year)
Face Value = 1000
YM-?, C-40, Face Value - 1,000, P-103.75/100× 1000 = 1037.5
YM = (40 + (1000-1037)/8) ÷ ( 1/2× (1000 + 1037.5 ) ) =0.0347
YM = 0.0347 × 100 = 3.47%
Yield to Maturity = 3.47%
A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:
Answer:
$32.50
Explanation:
Calculation for the company's book value per common share
Using this formula
Book value per common share =[Stockholders' equity -Preferred shares*Preferred stock Stock price per share/ Shares of common stock outstanding,
Let plug in the formula
Book value per common share= [$680,000 - (500 x $60)]/20,000
Book value per common share=$680,000-$30,000/20,0000
Book value per common share= $650,000/20,000
Book value per common share=$32.50
Therefore the company's book value per common share will be $32.50
Many managers describe performance appraisal as the responsibility that they like least. Why is this so? What could be done to improve the situation?
Answer:
Performance appraisal is by its very nature subjective. To improve the situation, as much as it is possible, objectivity should be allowed to rule all appraisal processes.
Explanation:
Performance appraisal is the formal evaluation of employees by their managers for the purpose of aligning employees' performance to the achievement of corporate objectives. To achieve goal congruence between employees who have different objectives for their work and the organization which wants to achieve profit and other corporate goals, performance appraisals are carried out periodically. However, the process has been marred by manager's bias, incompetence, and other problems.
When the Performance appraisal is by its very nature subjective. then to boost true, the maximum amount because it is feasible, objectivity should have been allowed to rule all appraisal processes.
How to describe Managers Performance?The Performance of appraisal is the formal evaluation of employees by their managers for the aim of aligning employees performance to the achievement of corporate objectives. to realize goal congruence between employees who have different objectives for their work and also the organization which wants to realize profit and also other corporate goals, performance appraisals are allotted periodically. However, the method has been marred by the manager's bias, incompetence, and other problems.
Find out more information about Managers Performance here:
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Mauro Products distributes a single product, a woven basket whose selling price is $20 per unit and whose variable expense is $17 per unit. The company’s monthly fixed expense is $8,100. Required: If the company's fixed expenses increase by $600, what would become the new break-even point in dollar sales?
Answer:
the new break-even point in dollar sales is $29,000.
Explanation:
Break even point is the level of activity where a firm makes neither a profit nor a loss.
Break even point (dollar sales) = Fixed Cost ÷ Contribution Margin Ratio
Where, Contribution Margin Ratio = Contribution ÷ Sales
= ($20 - $17) ÷ $20
= 0.30
New Break even point (dollar sales) = ($8,100 + $600) ÷ 0.30
= $29,000
Your auto dealer gives you the choice to pay $15,500 cash now, or make three payments: $8,200 now, $4,200 in one year and $3,200 in two years. If your cost of money (discount rate) is 7.25%, what is the PV of the installment plan?
Answer:
The answer is $14,898.07
Explanation:
Assume that the cost of money (discount rate) of 7.25% is on annual basis.
Present value (PV) of the installment plan is:
PV = Down payment + PV(first installment) + PV(second installment)
= $8,200 + $4,200 / (1 + 7.25%) + $3,200 / (1 + 7.25%)^2 = $14,898.07
Obviously, the three payments option is more lucrative than the 100% down payment one.
Gross Corporation adopted the dollar-value LIFO method of inventory valuation on Dec 31, 2016. Its inventory at that date was $1,100,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:
Date Inventory at Current Prices Current Price Index
December 31, 2017 $1,284,000 107
December 31, 2018 $1,450,000 125
Deceber 31, 2019 $1,625,500 130
1. What is the cost of ending inventory December 31, 2017 under Dollar-value LIFO method?
2. What is the cost of ending inventory December 31, 2018 under Dollar-value LIFO method?
3. What is the cost of ending inventory December 31, 2019 under Dollar-value LIFO method?
Answer:
1. $1,207,000
2. $1,164,200
3. $1,281,701
Explanation:
To calculate ending inventory under the dollar value LIFO method, the steps below shall be followed.
Step 1
Y = Current price at year end / Price index at that time
Step 2
Ending inventory = Opening inventory value + ( Y - Opening inventory value ) × Index value.
Gross corporation
Ending inventory
2016 1,100,000
1. Cost of ending inventory at 31, December 2017, under dollar value LIFO
= 1,284,000 / 1.07
= $1,200,000
Ending inventory
= $1,100,000 + ( $1,100,000 - $100,000 ) × 1.07
= $1,207,000
2. Cost of ending inventory at 31, December 2018, under dollar value LIFO
= $1,450,000/1.25
= $1,160,000
Ending inventory
= $1,100,000 + ( $1,160,000 - $1,100,000) × 1.07
= $1,164,200
3. Cost of ending inventory at 31, December 2019, under dollar value LIFO
= $1,625,500/1.30
= $1,250,385
Ending inventory
= $1,164,200 + $90,385 × 1.30
= $1,281,701
Lone Wolf Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $60,400, the accumulated depreciation is $24,200, its remaining useful life is five years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $113,800. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on current and proposed operations: Current Operations Proposed OperationsSales $191,500 $191,500 Direct materials $65,200 $65,200 Direct labor 45,300 15,100 Power and maintenance 4,200 7,200 Taxes, insurance, etc. 1,500 5,000 Selling and administrative expenses 45,300 45,300 Total expenses $161,500 $137,800Required:Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated.
Answer:
Differential analysis for 1 year
Keep old Change Differential
machine machine amount
sales revenue 191,000 191,000 0
depreciation expense -4,840 -22,760 -17,920
per year
direct materials -65,200 -65,200 0
direct labor -45,300 -15,100 30,200
power and -4,200 -7,200 -3,000
maintenance
taxes and -1,500 -5,000 -3,500
insurance
S&A expenses -45,300 -45,300 0
total 24,660 30,440 5,780
If the new machine is purchased, profits will increase by $5,780 every year.
Differential analysis for 5 years
Keep old Change Differential
machine machine amount
sales revenue 955,000 955,000 0
depreciation expense -24,200 -113,800 -89,600
per year
direct materials -326,000 -326,000 0
direct labor -226,500 -75,500 151,000
power and -21,000 -36,000 -15,000
maintenance
taxes and -7,500 -25,000 -17,500
insurance
S&A expenses -226,500 -226,500 0
total 123,300 152,200 28,900
If the new machine is purchased, profits will increase by $28,900 for the 5 year period.
2. A constraint which represents a target value for a problem is called a a. fuzzy constraint. b. vague constraint. c. preference constraint d. soft constraint
Answer: soft constraint
Explanation:
The soft constraint is defined as
a constraint on a random variable (X)that permits overruling the constraint.a function from the domains in its scope(set of variables ) into a real number.Hence, a constraint which represents a target value for a problem is called a soft constraint.
Thus the correct option is d. soft constraint.
On January 1, a company issues bonds dated January 1 with a par value of $390,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $405,830. The journal entry to record the issuance of the bond is: Multiple Choice Debit Bonds Payable $390,000; debit Bond Interest Expense $15,830; credit Cash $405,830. Debit Cash $405,830; credit Bonds Payable $405,830. Debit Cash $405,830; credit Premium on Bonds Payable $15,830; credit Bonds Payable $390,000. Debit Cash $405,830; credit Discount on Bonds Payable $15,830; credit Bonds Payable $390,000. Debit Cash $390,000; debit Premium on Bonds Payable $15,830; credit Bonds Payable $405,830.
Answer:
The journal entry to record issuance is:
January 1, 202x, bonds are issued at a premium
Dr Cash 405,830
Cr Bonds payable 390,000
Cr Premium on bonds payable 15,830
Explanation:
When a bond's coupon rate is higher than the market rate, the bonds will sell at a premium or a value higher than the bond's face value. On the other hand, if the bond's coupon rate is lower than the market rate, the bonds will sell at a discount or a value lower than the bond's face value.
An all-equity firm is considering the following projects:
Project Beta IRR
W .85 8.9%
X .92 10.8
Y 1.09 12.8
Z 1.35 13.3
The T-bill rate is 4 percent, and the expected return on the market is 11 percent.
a. Which projects have a higher expected return than the firm's 11 percent cost of capital?
b. Which projects should be accepted?
c. Which projects would be incorrectly accepted or rejected if the firm's overall cost of capital were used as a hurdle rate?
Answer:
Projects Y and Z
b. Projects W and Z
c. Projects W and Y
Explanation:
CAPM equation : Expected return = Risk free rate + Beta x (Expected market return - Risk free rate)
W = 4% + [0.85 x (11% - 4%)] = 9.95%
X = 4% + (0.92 x 7%) = 10.44%
Y = 4% + (1.09 x 7%) = 11.63%
Z = 4% + (1.35 x 7%) = 13.45%
Projects Y and Z have an expected return greater than 11%
b. Projects W and Z should be accepted because its expected return is higher than the IRR
c. Project W would be incorrectly rejected because the expected rate of return is less than the overall cost of capital (i.e. 9.95 is less than 11). But its expected rate of return is greater than the IRR
Y would be incorrectly accepted because its expected rate of return is greater than the overall cost of capital but its expected rate of return is less than the IRR
What type of Decision Making Model has the goal of maximizing efficiency by picking the best alternative based on specific criteria
Answer:
Rational model.
Explanation:
Rational decision model uses logic and objectivity while trying to solve a problem. It is not subjective neither does it have to depend on intuition. It helps one to identify a problem and get a solution amongst different options. It maximizes efficiency through picking the best option amongst the rest based on a specific criteria. It is assumed that the person making this choice has enough information about the options.
A retail operation has an average gross margin of 35%. If the average monthly sales for the store is $200,000.00, what is the cost of goods sold?
Answer:
COGS= $130,000
Explanation:
Giving the following information:
A retail operation has an average gross margin of 35%.
Sales= $200,000.00
To calculate the cost of goods sold, we need to use the following formula:
Gross margin= sales - COGS
COGS= sales - gross margin
COGS= 200,000 - (200,000*0.35)
COGS= $130,000
Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 4 pounds of the material, S5 uses 2.2 pounds of the material, and G9 uses 6.5 pounds of the material. Demand for all products is strong, but only 55,400 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows. K1 S5 G9 Selling price $155.8 $108.92 $205.55 Variable costs 91.00 90.00 136.00
Required:
Calculate the contribution margin per pound for each of the three products.
Answer:
The contribution margin per pound for each of the three products is :
K1 = $16.20
S5 = $8.60
G9 = $10.70
Explanation:
First Calculate the Contribution per margin for for the 3 products.
K1 S5 G9
Selling Price $155.80 $108.92 $205.55
Less Variable Costs ($91.00) ($90.00) ($136.00)
Contribution $64.80 $18.92 $69.55
Then determine the contribution per pound as follows :
K1 S5 G9
Contribution $64.80 $18.92 $69.55
Material Usage per unit 4 pounds 2.2 pounds 6.5 pounds
Contribution per pound $16.20 $8.60 $10.70
Sloan Transmissions inc.,has the following estimates for its new gear assembly project: price=$2,200 per unit., variable cost= $440 per unit., fixed costs = $1.6 million., quantity = 90,000 units. suppose the company believes all of its estimates are accurate only to
Answer:
Best case
Price 2,640
Variable cost per unit 352
Fixed cost 1.28 million
Quantity 108,000 units
Worst case
Price 1,760
Variable cost per unit 528
Fixed cost 1.92 million
Quantity 72,000 units
Explanation:
Based on the information given in the best case expenses would be 20% lower while the incomes will be 20% higher.
Calculation for the price
Price = 2,200 ×(1+0.20)
Price=2,200×1.2
Price = 2,640
Calculation for Variable cost per unit
Variable cost per unit = 440× (1-0.20)
Variable cost per unit=440×0.80
Variable cost per unit= 352
Calculation for fixed cost
Fixed cost = 1.60 million ×(1-0.20)
Fixed cost=1.60 million× 0.80
Fixed cost= 1.28 million
Calculation for the Quantity
Quantity = 90,000 × (1+0.20)
Quantity =90,000×1.2
Quantity=108,000units
Therefore, Best case will be:
Price 2,640
Variable cost per unit 352
Fixed cost 1.28 million
Quantity 108,000units
Based on the information given in the worst case expenses would be 20% higher while incomes would be 20% lower.
Calculation for the price
Price = 2,200 × (1-0.20) = 1080
Price=2,200 ×0.8
Price=1,760
Calculation for the Variable cost per unit
Variable cost per unit = 440 × (1+0.20)
Variable cost per unit=440× 1.2
Variable cost per unit= 528
Calculation for Fixed cost
Fixed cost = 1.60 million × (1+0.20)
Fixed cost=1.60 million×1.2
Fixed cost= 1.92 million
Calculation for the Quatity
Quantity = 90,000 ×(1-0.20)
Quantity=90,000×0.8
Quantity= 72,000 units
Therefore Worst case will be:
Price 1,760
Variable cost per unit 528
Fixed cost 1.92 million
Quantity 72,000 units
A creamery shop sells its special ice cream for $4.50 a quart. It costs them $3.00 a quart to make it. The daily demand for this flavor is normally distributed with a mean of 35 quarts and a standard deviation of 4 quarts. Unsold ice cream is sold each day to a local restaurant at $1.50 per quart. What is the service level and corresponding optimal stocking level?
Answer and Explanation:
The computation of the service level and the corresponding optimal stocking level is shown below:
Given that
Selling price = SP = $4.50
Cost price = CP = $3.00
So,
Salvage value = V = $1.50
Average daily demand (d) = 35 quarts
The standard deviation of daily demand = 4 quarts
based on the above information
Overage cost = (Co) is
= CP - V
= $3.00 - $1.50
= $1.50
Now
Underage cost= (Cu)
= SP - CP
= $4.50 - $3.00
= $1.50
So,
Service level is
= Cu ÷ (Co + Cu)
= 1.50 ÷ (1.50 + 1.50)
= 1.50 ÷ 3.00
= 0.50
= 50%
Now
At 50 % service level, the value of Z is 0
So,
Optimal stocking level is
= d + Z × standard deviation
= 35 + (0 × 4)
= 35 + 0
= 35 quarts
A decrease in the basis will __________ a long hedger and __________ a short hedger. Group of answer choices hurt; hurt hurt; benefit benefit; have no effect upon benefit; benefit benefit; hurt
Answer:
hurt, benefit
Explanation:
The basis in a future contract is defined as the difference between the spot price of the asset in the cash market and the price of the same assets future contract.
A short hedge is an investment strategy that is used to protect hedge, against the risk of future decline in asset price or basically to hedge against potential losses by selling at a determined rate. This means that when one is in possession of a commodity and in order to protect against a decline, in the market, you sell (go short) the future contract , while long hedge is when you anticipate a need for the underlying commodity in the future. It means that to protect against an increase in the market price, you buy (go long) the future contract. Then when you are ready to buy the commodity, any increase in the market price is offset by your gain on the future contract.
The above means that where an asset and a contract are liquidated before due dates , there would be basis risk hence both the future and spot price need not move in lockstep before delivery date. This means that a decrease in the basis will benefit the short hedger and hurt the long hedger.
Below are the account balances for Cowboy Law Firm at the end of December.
Accounts Balances
Cash $5,000
Salaries expense 2,000
Accounts payable 3,000
Retained earnings 4,000
Utilities expense 1,100
Supplies 13,400
Service revenue 8,900
Common stock 5,600
Required:
Use only the appropriate accounts to prepare an income statement.
Answer:
Cowboy Law Firm
Income statement for the year ended December.
$
Service revenue 8,900
Less Expenses :
Salaries expense (2,000)
Utilities expense (1,100)
Net Income / (Loss) 5,800
Explanation:
Income statements shows Revenues earned and Expenses incurred at the end of the trading period.
