Afrah's capital balance would be $10,000, as stated in the information provided. Therefore, the correct answer is C) $10,000.
Afrah's capital balance would be $10,000. This is determined by multiplying Afrah's contribution of $10,000 by her equity share of 25%. Since Afrah is joining as a new partner, her capital balance is based on the amount she brings into the partnership and the agreed-upon percentage of ownership.To calculate Afrah's capital balance, we multiply $10,000 by 25% (or 0.25), which gives us $2,500. However, it is important to note that Afrah's capital balance is not limited to her contribution alone. It represents her ownership stake in the partnership and will be adjusted accordingly based on the partnership's profits, losses, and additional contributions.Therefore, the correct answer is C) $10,000, reflecting Afrah's initial capital contribution and equity share in the partnership.
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Question:
Mariam, Sabah and Fatima are partners with capital balances of $40,000, $60,000 and $50,000 respectively. They find that Afrah, a new partner, is a talented engineer with an experience useful for the company. Afrah accepts joining them as a new partner and ready to contribute $ 10,000 for an equity share of 25%. Afrah's capital balance would be:
A) $2,500.
B) $37,500.
C) $10,000.
D) $40,000.
The asset's book value is determined by deducting the residual value from its original cost O True O False Moving to another question will save this response. MacBook Pro
The correct answer is True. The asset's book value is determined by deducting the residual value from its original cost.
The asset's book value refers to the total cost of an asset after the accumulated depreciation has been subtracted from its original cost. This means that the book value of an asset decreases over time due to depreciation. Depreciation can be defined as the loss of value of an asset due to wear and tear, obsolescence, or other factors.
The residual value refers to the estimated value of an asset at the end of its useful life. The formula for calculating book value is: Book value = Original cost - Accumulated depreciation, Residual value, also known as salvage value or residual worth, refers to the estimated value of an asset at the end of its useful life or lease term. It represents the remaining worth of the asset after accounting for depreciation or wear and tear. The residual value is often used in financial calculations and lease agreements.
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When would AMC Theatres recognize revenue from its AMC Stubs A-List subscription service?
AMC Entertainment Holdings, Inc. (NYSE: AMC (Links to an external site.)), also known as AMC Theatres, recently announced a $19.95 per month subscription service, AMC Stubs A-List (Links to an external site.), to compete with MoviePass. With the A-List program, subscribers can see up to three movies per week with few restrictions. The minimum commitment is three months, after which time the subscriber can cancel at any time. Just as a point of comparison, the cost of MoviePass is between $7.95 - $9.95 per month. Depending on the plan, MoviePass subscribers can see up to one movie per day, subject to restrictions. Subscribers can cancel at any time. MoviePass stock has fallen greatly in recent weeks because investors do not see its business model as sustainable. MoviePass has significantly more expenses than revenues and its cash is dwindling rapidly.
Questions
1)Analyze the current financial position of MoviePass’.
2)Assume that a new subscriber signs up for the AMC Stubs A-List program and pays $19.95 for the first month on August 1. Prepare the journal entry on August 1 and indicate the effects on the accounting equation and financial statements.
3)On what day will AMC be able to recognize that first $19.95 as revenue? Indicate the effects on the accounting equation and financial statements.
4)If AMC charges a new subscriber for the first three months (the minimum commitment) when the subscriber signs up for the A-List program, when will AMC recognize the revenue from the first three months for that new subscription? Prepare the journal entry for the three-month prepayment by AMC beginning August 1st. Indicate the effects on the accounting equation and financial statements.
The AMC Theatres recognize revenue from its AMC Stubs A-List subscription service under given conditions
1)The current financial position of MoviePass is weak and precarious. The company's business model is considered unsustainable, as it has more expenses than revenues and its cash reserves are depleting rapidly. With significant expenses and limited revenue generation, MoviePass is facing financial difficulties.
2)Journal entry for a new subscriber signing up for the AMC Stubs A-List program and paying $19.95 for the first month on August 1:
August 1:
Debit: Cash $19.95
Credit: Unearned Revenue $19.95
Effects on the accounting equation:
Assets: Cash increases
Liabilities: Unearned Revenue increases
3)AMC will be able to recognize the first $19.95 as revenue on a daily basis over the period the service is provided .Effects on the accounting equation and financial statements. For each day of service provided, the following journal entry would be made to recognize revenue:
Debit: Unearned Revenue (portion related to the day of service)
Credit: Revenue (portion related to the day of service)
This journal entry reduces the unearned revenue balance and increases the revenue account.
4)Journal entry for AMC charging a new subscriber for the first three months (the minimum commitment) when the subscriber signs up for the A-List program, beginning August 1:
Debit: Cash $59.85 (3 months x $19.95 per month)
Credit: Unearned Revenue $59.85
Effects on the accounting equation:
Assets: Cash increases
Liabilities: Unearned Revenue increases
Revenue recognition for the first three months:
AMC will recognize the revenue from the first three months on a pro-rata basis over the three-month period.
Effects on the accounting equation and financial statements:
For each day of service provided over the three-month period, the following journal entry would be made to recognize revenue:
Debit: Unearned Revenue (portion related to the day of service)
Credit: Revenue (portion related to the day of service)
This journal entry reduces the unearned revenue balance and increases the revenue account.
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presto company purchased equipment and these costs were incurred: ch-9-q-75 presto will record the acquisition cost of the equipment as group of answer choices $45,000. $48,600. $49,240. $50,100.
The acquisition cost of the equipment recorded by Presto Company would be $49,240. This amount is calculated by adding up the purchase cost of $45,000 and the additional costs incurred, which total $4,240 ($48,600 - $45,000).
The acquisition cost of an asset includes not only the purchase price but also any additional costs directly attributable to acquiring and preparing the asset for use. In this case, the purchase cost of the equipment is given as $45,000. However, the question states that "these costs were incurred," suggesting there are additional expenses. The difference between the purchase price and the final cost ($48,600 - $45,000) is $3,600. To calculate the acquisition cost, this amount needs to be added to the purchase price. Hence, the total acquisition cost is $45,000 + $3,600 = $49,240.
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What are the disadvantages of human capital approach in impact
valuation in CBA ?
The human capital approach is a fundamental component of cost-benefit analysis. This technique involves measuring the monetary value of an individual's production potential and integrating it into the accounting framework. The use of this approach has certain drawbacks, which are highlighted below:
1. Issues with the scope of evaluation: The human capital approach is dependent on future projections of earnings potential, which can be unreliable. These projections may be influenced by a variety of factors such as illness, disability, or retirement, which may or may not materialize. As a result, there is a risk that the evaluation may be excessively limited, resulting in a lack of depth or detail.
2. Disregards distributional concerns: The human capital approach assumes that all individuals have the same wage rates, benefits, and working conditions, which is untrue. This approach fails to consider the economic inequalities that exist among various groups and as a result, may not accurately reflect the net benefits of an intervention.
3. Not Inclusive of Non-economic Value: The human capital approach is solely concerned with economic productivity and does not take into account the intangible benefits of an intervention, such as environmental conservation, social welfare, and cultural preservation.
4. Problems with intergenerational comparison: The human capital approach prioritizes the present over the future, and as a result, future generations may suffer as a result of a decision made today.5. Does not account for the intrinsic worth of human life: It is difficult to quantify the worth of human life in monetary terms, and the human capital approach does not do this.
As a result, practitioners must remain cautious when utilizing this technique and ensure that it is used in conjunction with other approaches to obtain a comprehensive view of the net benefits of a particular intervention.
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Relative Purchasing power parity says that across countries
Inflation rates are the same
Growth rates are the same
Expressed in the same currency, price levels are the same
Expressed in the same currency, inflation rates are the same
None of the above
Relative purchasing power parity states that expressed in the same currency, price levels are the same across countries.
This theory is known as the purchasing power parity theory. When the purchasing power of a nation's currency is in equilibrium, that is, it has the same purchasing power domestically and internationally, then the exchange rate between that country's currency and other currencies would be considered "fair." This theory assumes that transport expenses, taxes, and other costs that affect the price of goods and services are the same in all countries. This is rarely the case in reality. Furthermore, while inflation rates are taken into consideration when calculating the relative purchasing power parity, this theory does not claim that inflation rates are the same across countries. As a result, the appropriate option is: Expressed in the same currency, price levels are the same.
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A portfolio's return is normally distributed. It is observed that 99% of the time, the portfolio return is likely to be between 7.1904% and 7.8096%. What is the mean return and standard error?
Given that the portfolio's return is usually distributed. It is observed that 99% of the time, the portfolio return is likely to be between 7.1904% and 7.8096%. 7.5% and 0.1548% are the mean return and standard error respectively.
The mean and standard deviation of the return can be calculated as follows:
Formulae: Z = (x-μ)/σ
Where Z is the z-score the observed value
μ is the mean of the probability distribution
σ is the standard deviation probability density
the function of a standard normal distribution can be given as P(x) = (1/σ*√2π)*e^(-1/2*[(x-μ)/σ]^2)
Let the mean of the portfolio return be μ and the standard deviation be σx1 is the lower limit of the return, which is 7.1904% x 2 is the upper limit of the return,
which is 7.8096%x1 = μ - z*σ7.1904% = μ - z*σx2
= μ + z*σ7.8096%
= μ + z*σ99% of the time,
the portfolio return is likely to be between
x1 and x2.So, the z-score corresponding to 99% probability is 2.33
Hence, substituting the values we have:
= 7.1904%
= μ - 2.33*σ7.8096%
= μ + 2.33*σSolving for μ,
we get:μ = (7.1904 + 7.8096)/2μ
= 7.5%Therefore, the mean return is 7.5%. The difference between the upper limit and the lower limit of the portfolio is the range of 0.6192%. Hence, the standard deviation can be calculated as follows: σ = Range/4σ = 0.6192/4σ = 0.1548%Therefore, the standard error is 0.1548%. Hence, the mean return and standard error are 7.5% and 0.1548%, respectively.
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Mr. Nicholas Sweet
President & CEO
SUGAR RUSH INC.
1234 Mary Jane Avenue
New York, NY 10000
Dear Mr. Sweet,
This letter is being sent in accordance and in compliance with Equal Employment Opportunity Commission (EEOC) Section: 0001. This correspondence is in response to a letter received, dated January 3, 2022, written by a Mr. Jeremy Smith.
EEOC Compliance Officer, Jenny Yang, has conducted a preliminary investigation in a compliant made by Mr. Smith in which the allegation is that Sugar Rush Inc. has violated Title VII of the Civil Rights by conducting recruitment activities which discriminate against a candidate’s race, ethnicity, national origin and sexual orientation.
ALLEGATION STATEMENT
On Monday, October 25, 2021, Mr. Jeremy Smith, a 35 year old African American Male, interviewed for the position entitled Customer Service Supervisor. During the interview process, it was conveyed to Mr. Smith that Sugar Rush Inc. had already interviewed a number of other candidates through the process of employee referrals. Mr. Smith contends that several of the questions pertained to his "outside" interests and asked if he belonged to any groups or associations that Sugar Rush Inc. would find interesting or want to learn more about. Mr. Smith claims to have informed Ms. Michelle Cocoa, Sr. Human Resources Manager that he belonged to the following groups: Association of Young Americans, ACLU, NAACP and the local LGBT Chapter. Mr. Smith further contends that his interview lasted two (2) hours in duration. On Wednesday, October 27, 2021, Mr. Smith received a letter from Sugar Rush Inc. indicating that he was not selected for the position.
It must be noted that the EEOC has since determined that the prior five (5) applicants for the same position were sourced through employee referrals and all were all Caucasian.
Thank you in advance for your cooperation and attention to this matter. We expect to receive your response no later than August 1, 2022. Please note that this letter is an informal discussion of the issues raised and should not be considered an official opinion of the EEOC.
Sincerely,
Carol Martin
Assistant Legal Counsel EEOC
Michael Munch Email. Please read through the email in the Final Project documentation found in the Assignment Section on BB. Please read and respond to the following:
a) As HR, how would you advise the CEO regarding the email?
b) In a response email to Michael, what would you say?
the response should convey the company's commitment to addressing the issue, conducting a thorough investigation, and taking necessary actions to ensure fair and equal treatment of all employees.
1. Acknowledge the seriousness of the allegations: Explain to the CEO that the email contains a formal complaint related to a potential violation of Title VII of the Civil Rights Act. Emphasize the need to address this matter promptly and thoroughly.
2. Initiate an internal investigation: Recommend launching an immediate investigation into the allegations made by Mr. Jeremy Smith. This investigation should involve gathering all relevant information, including interviews with parties involved, reviewing interview records, and examining the recruitment and selection process.
3. Maintain confidentiality: Stress the importance of handling the investigation with utmost confidentiality to protect the privacy and rights of all parties involved. Remind the CEO to ensure that information related to the investigation is only shared with individuals directly involved in the process.
4. Review company policies: Advise the CEO to review the company's equal employment opportunity policies and practices. Ensure they are aligned with federal and state regulations and promote a fair and inclusive work environment.
5. Take appropriate corrective actions: If the investigation reveals any discriminatory practices or violations, recommend taking appropriate corrective actions. These may include offering Mr. Smith a fair opportunity for reconsideration, revising recruitment procedures, providing additional training to employees involved in the selection process, or implementing diversity and inclusion initiatives.
b) In response to Michael's email, I would address the following points:
1. Express concern and appreciation: Begin by expressing gratitude for Michael bringing this matter to HR's attention and assuring him that the complaint will be taken seriously.
2. Confirm the initiation of an investigation: Inform Michael that the company has commenced an internal investigation into the allegations raised by Mr. Smith. Explain that the investigation will be conducted in a fair and objective manner.
3. Assure confidentiality: Reiterate the company's commitment to maintaining confidentiality throughout the investigation process. Emphasize that information related to the investigation will only be shared on a need-to-know basis to protect the privacy and rights of all individuals involved.
4. Communicate next steps: Inform Michael that HR will thoroughly examine the interview records, conduct interviews with relevant parties, and review company policies and procedures to ensure compliance with equal employment opportunity regulations.
5. Commit to appropriate actions: Assure Michael that if any violations or discriminatory practices are found, the company will take appropriate corrective actions to address the situation. Highlight the company's commitment to fostering a fair and inclusive work environment.
6. Provide a timeline: Give Michael an approximate timeline for completing the investigation and inform him that HR will keep him informed of any significant developments or outcomes.
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WonderBurgers LLC, is a UK restaurant chain with more than 125 restaurants throughout mainland Britain. The firm positions itself as a 'hip' burger chain, attracting a premium customer segment. Restaurants operate mainly in large metropolitan areas. Recently the company acquired a small burger chain headquartered in France. WonderBurgers, LLC wants to expand operations further by acquiring other restaurant chains in Europe. WonderBurgers LLC decided to bring on a consultant (You) to advise them on how to best expand and set up operations in foreign markets.
Expanding a business into foreign markets is a significant undertaking, and WonderBurgers LLC must do so cautiously and deliberately. A successful expansion strategy includes understanding the market, adapting to the local environment, and adhering to cultural norms and regulations.
An effective expansion strategy requires a comprehensive market analysis. Before entering a new market, it's critical to understand the local culture, consumer behavior, and competitive landscape. This analysis should include gathering market intelligence on consumer preferences, regulatory requirements, and competitors' positioning and marketing strategies.
Understanding the cultural environment is also critical to success. Cultural differences between countries can have a significant impact on how products and services are perceived. Even minor cultural differences, such as language, customs, and social norms, can have an impact on business operations. It's critical to understand these differences and adapt the business accordingly.WonderBurgers LLC must also adapt to the local business environment. Different markets have different business practices and regulatory requirements. The firm must conduct a thorough review of the local laws and regulations to ensure compliance. Additionally, cultural differences may impact the supply chain, labor practices, and other operational aspects of the business.
A successful expansion strategy requires careful planning and execution. By conducting a comprehensive market analysis, adapting to the local environment, and adhering to cultural norms and regulations, WonderBurgers LLC can successfully expand operations into new markets and achieve long-term success.
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Calculate the NPV for the following projects with a discount rate of 12%:
a.Project 1 costs $100,000 and earns $50,000 each year for three years.
b.Project 2 costs $200,000 and earns $150,000 in the first year, and then $75,000 for each of the next two years.
c.Project 3 costs $25,000 and earns $20,000 each year for three years.
d. If the projects are mutually exclusive, which should we accept?
e. If the projects are independent, which should we accept?
All three projects have a positive NPV value, which means all three should be accepted.
Project Analysis and Net Present Value (NPV) calculations for the following projects with a discount rate of 12% are mentioned below:
Project 1:
Net Cash Flows:
Year 1: $50,000
Year 2: $50,000
Year 3: $50,000
NPV Calculation:
N = 3; I/Y = 12;
PV = -100,000;
PMT = 50,000;
FV = 0;
NPV = $94,148.69
Project 2:
Net Cash Flows:
Year 1: $150,000
Year 2: $75,000
Year 3: $75,000
NPV Calculation:
N = 3;
I/Y = 12;
PV = -200,000;
PMT = 75,000;
FV = 0;
NPV = $100,262.31
Project 3:
Net Cash Flows:
Year 1: $20,000
Year 2: $20,000
Year 3: $20,000
NPV Calculation:
N = 3;
I/Y = 12;
PV = -25,000;
PMT = 20,000;
FV = 0;
NPV = $16,585.23
Project Acceptance:If the projects are mutually exclusive, then the project with the highest NPV value should be chosen:
Project 2 NPV = $100,262.31If the projects are independent, then all projects should be accepted whose NPV value is greater than zero. Here, all three projects have a positive NPV value, which means all three should be accepted.
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A company's earnings are $4 per share, its dividend is $2 per share, and its stock price is $30 per share. Its P/E is O a. 7.5. O b. 5. O c. 15 percent. O d. 15. A conservative investor should only invest in a variety of bond mutual funds. Select one: O True O False
1. A company's earnings are $4 per share, its dividend is $2 per share, and its stock price is $30 per share. Its P/E will be 7.5.
To calculate the price-to-earnings ratio (P/E) of a company:
Earnings per share (EPS) = $4 (Given)
Stock price = $30 (Given)
P/E = Stock price / EPS
= $30 / $4
= 7.5
Therefore, the P/E ratio for the company is 7.5. Therefore, the correct option A.
2. The statement " A conservative investor should only invest in a variety of bond mutual funds. " is False.
Bonds are a relatively conservative investment option as compared to stocks, but conservative investors don't necessarily have to invest exclusively in bond or mutual funds. Investors might also consider other investment options such as cash, certificates of deposit (CDs), money market funds and dividend stocks.
Investment strategy is based on individual risk tolerance, goals and time horizon. Diversification across different asset classes is usually recommended to reduce risk. This may include a combination of bond funds and other conservative investment options.
Overall, bond mutual funds are considered less risky than stock, there is no one size fits all investment strategy available. It is important to consult a financial advisor to determine best investment approach.
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If a small change in price creates a large change in demand, then we would say that the demand is elastic / inelastic.
If a small change in price creates a large change in demand, then we would say that the demand is elastic. Option A is correct answer.
We would describe the demand as being very elastic if a minor change in price resulted in a significant change in the amount required, i.e., being extremely sensitive to price changes. In contrast, we would state that the demand is inelastic if a significant change in price only causes a relatively minor change in the amount required.
The change in consumption of a product in response to a change in its price is gauged by the term "price elasticity of demand." The good is elastic if price elasticity exceeds 1; it is inelastic if price elasticity is less than 1. A good is completely inelastic when the price elasticity is 0.
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The complete question is, "If a small change in price creates a large change in demand, then we would say that the demand is
A. elastic
B. inelastic"
Below, you are provided with a consumer's income and the prices of two different goods. You will identify different combinations of the two goods that the consumer can afford and construct the consume
Suppose a consumer has an income of $100, and two different commodities, A and B, whose prices are $5 and $10, respectively. We will construct the consumer's budget constraint using this information.
The amount of good A that the consumer can purchase with $100 is $100/$5 = 20 units. Similarly, the amount of good B that the consumer can purchase with $100 is $100/$10 = 10 units.
We can construct the consumer's budget constraint graphically by plotting the quantities of goods A and B on the X-axis and Y-axis, respectively. The slope of the budget constraint is equal to the price ratio of the two goods, which is $5/$10 = 1/2.
To plot the budget constraint, we start with the X-intercept, which represents the quantity of good A the consumer can purchase when they spend all their income on good A, which is 20 units. Then we plot the Y-intercept, which represents the quantity of good B the consumer can purchase when they spend all their income on good B, which is 10 units.
In conclusion, a consumer with an income of $100 and prices of $5 and $10 for goods A and B, respectively, can afford different combinations of goods, and the budget constraint line represents these combinations graphically.
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which of the following statements is (are) correct? a. the federal government's largest source of tax revenue is personal income taxes. b. medicaid, medicare and social security are examples of transfer payments. c. the government has a budget deficit if its total revenues are less than its total expenditures. d. all of the above are correct.
The correct answer is d. All of the above statements are correct. The government has a budget deficit if its total revenues are less than its total expenditures.
a. The federal government's largest source of tax revenue is personal income taxes. This is true as personal income taxes contribute a significant portion of the federal government's tax revenue.
b. Medicaid, Medicare, and Social Security are examples of transfer payments. Transfer payments refer to payments made by the government to individuals or groups without any goods or services being exchanged. Medicaid, Medicare, and Social Security are government programs that provide financial assistance or benefits to eligible individuals or groups.
c. The government has a budget deficit if its total revenues are less than its total expenditures. A budget deficit occurs when the government's expenditures exceed its revenues. This means that the government is spending more money than it is bringing in through various sources such as taxes, fees, and other revenues.
Therefore, all three statements are correct.
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briefly discuss the three type/ components of investment.
The three type/ components of investment is physical investments, financial investments, and human investments
Investment is a term used to refer to the act of buying assets with the expectation of generating income in the future. Investments can come in three types which include physical investments, financial investments, and human investments. Physical investments refer to investments made in tangible assets such as real estate, machinery, and equipment. Physical investments are made in the hope of generating future income from these assets. Financial investments refer to investments made in financial assets such as stocks, bonds, and mutual funds.
Financial investments are made with the aim of generating future income from the dividends, interest, and capital gains that these investments may generate. Finally, human investments refer to investments made in oneself with the aim of increasing knowledge, skills, and abilities that can lead to future earnings. Human investments can come in the form of education, training, and skills development. So therefore physical investments, financial investments, and human investments are the three type/components of investments.
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Which of the following is not a defense to product liability: 1. Knowledgeable user 2. Commonly known dangers 3. Assumption of Od Suomitations 4. They are all defenses to product liability cases
Among the following options, "Assumption of Od Suomitations" is not a defense to product liability. The correct option is 3. Assumption of Od Suomitations
Product liability refers to a manufacturer or seller's legal responsibility for any injuries or damage caused by a faulty product they produce or sell. If an individual is hurt or suffers damages as a result of a defective product, they have the right to seek compensation from the producer or seller.
Product liability cases can be brought about in various ways, including:-Design defect- Manufacturing defect- Failure to warn- Breach of warranty Defenses to product liability cases: Here are some defenses to product liability cases.
Knowledgeable User: A defense to a claim of product liability is that the injured party was a knowledgeable user of the product. If the injured person is aware of the risks and dangers of using the product, they may not be able to sue for damages.
Commonly known dangers: Another defense is that the danger or risk is well-known, and the injured party should have been aware of it. For example, if someone is injured while operating a chainsaw and argues that they had no idea it was dangerous, they may not be able to sue.
Contributory negligence: This defense argues that the plaintiff contributed to their injury by failing to use the product safely. If a product has warning labels or instructions and the user fails to follow them, this defense can be utilized.- Assumption of risk: If the plaintiff knows of the risks associated with the product and proceeds to use it, the defense of assumption of risk can be utilized.
They will not be able to sue for damages if they are injured. However, if the risk was not clear or it was not well-known, this defense may not be effective. Assumption of Od Suomitations is not a defense to product liability cases. It seems to be a typographical error in the question, so the question does not provide four alternatives. all the other three options are defenses to product liability. Therefore, The correct option is 3.
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Ted Predictions On Broussard Skateboard's sales are expected to increase by 15% from 57 million in 2019 to $9.43 million in 2020. Its assets totaled $5 million at the end of 2019. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 4%, and the forecasted payout ratio is 60%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar. - Kroom Accessibility Good to ge hp E 100%
To forecast Broussard Skateboard's additional funds needed (AFN) for the coming year, we can use the AFN equation. The AFN equation calculates the difference between the company's projected assets and liabilities, taking into account the expected increase in sales and the requirement for assets to grow at the same rate.
Let's break down the information provided:
1. Sales growth: The sales are expected to increase by 15% from $57 million in 2019 to $9.43 million in 2020. This growth rate will be used to estimate the increase in assets.
2. Assets: At the end of 2019, Broussard Skateboard's assets totaled $5 million. Since the company is at full capacity, the assets must grow at the same rate as the projected sales growth of 15%.
3. Current liabilities: At the end of 2019, the current liabilities were $1.4 million, consisting of accounts payable, notes payable, and accruals.
4. After-tax profit margin: The forecasted after-tax profit margin is 4%. This will be used to estimate the retained earnings.
5. Payout ratio: The forecasted payout ratio is 60%. This indicates the portion of the after-tax profit that will be paid out as dividends.
Now let's calculate the AFN using the AFN equation:
AFN = (A*/S₀) × ΔS - (L*/S₀) × ΔS - MS₁(RR)
Where:
AFN = Additional Funds Needed
A* = Assets required as a function of sales
S₀ = Last year's sales
ΔS = Change in sales
L* = Liabilities that spontaneously increase with sales
MS₁ = Retained earnings multiplier (1 - payout ratio)
RR = Retained earnings ratio (After-tax profit margin)
First, we calculate A* (Assets required as a function of sales):
A* = (Assets/Sales) × ΔS
A* = ($5 million/$57 million) × 15%
A* ≈ $1,315,789
Next, we calculate L* (Liabilities that spontaneously increase with sales):
L* = (Liabilities/Sales) × ΔS
L* = ($1.4 million/$57 million) × 15%
L* ≈ $365,789
Now we calculate the retained earnings using the after-tax profit margin and the payout ratio:
Retained Earnings = After-tax profit × (1 - Payout ratio)
Retained Earnings = $57 million × 4% × (1 - 60%)
Retained Earnings ≈ $912,000
Finally, we can calculate the AFN:
AFN = A* - L* - Retained Earnings
AFN ≈ $1,315,789 - $365,789 - $912,000
AFN ≈ $37,000
Therefore, Broussard Skateboard's additional funds needed for the coming year is approximately $37,000.
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Which of the following statements about free markets is FALSE? a. We perceive the restrictions placed on markets as harmful regulations when we disagree with the moral values underlying them b. Government interventions that restrict what market actors can and cannot do will always result in a lack of investment and a drop in innovation c. All markets have some level of government intervention which restricts the actions of market entities in some manner d. The concept of a free market is political in nature and market boundaries are defined through political processes e. All of the above are true
Among the given options, the false statement about free markets is: b. Government interventions that restrict what market actors can and cannot do will always result in a lack of investment and a drop in innovation.
Explanation: Free market is a kind of economic system where the government does not interfere in the business activities of the market. The following are the statements about free markets:
a. We perceive the restrictions placed on markets as harmful regulations when we disagree with the moral values underlying them: This statement is true. Many times, restrictions and regulations are seen as a hurdle to the smooth functioning of markets.
b. Government interventions that restrict what market actors can and cannot do will always result in a lack of investment and a drop in innovation: This statement is false. Government interventions are required in free markets to ensure the well-being of society as a whole and to prevent market failures. Some regulations are important for businesses and industries to operate smoothly.
c. All markets have some level of government intervention that restricts the actions of market entities in some manner: This statement is true. Government intervention is necessary to maintain a balance between the interests of businesses and society as a whole.
d. The concept of a free market is political in nature, and market boundaries are defined through political processes: This statement is true. The concept of a free market is based on political ideology and has political implications.
e. All of the above are true: This statement is also false as option (b) is incorrect.
Therefore, the correct answer is option b.
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Suppose the closed economy is in long-run equilibrium. Immigration of skilled workers shifts the long- run aggregate supply curve $60 billion to the right. At the same time, government purchases increase by $40 billion. If the MPC equals 0.75 and the crowding-out effect is $160 billion, what would we expect to happen in the long-run to real GDP and the price level? Select one: a. Both real GDP and the price level would be higher. b. Both real GDP and the price level would be lower. c. Real GDP would be higher, but the price level would be lower. d. Real GDP would be higher, but the price level would be the same.
The correct option is c. Real GDP would be higher, but the price level would be lower. When skilled workers immigrate, the long-run aggregate supply curve shifts to the right, indicating an increase in potential output and the economy's productive capacity. As a result, real GDP would increase in the long run.
Additionally, an increase in government purchases would lead to an increase in aggregate demand. However, since the economy is already in long-run equilibrium, the increase in aggregate demand would be offset by the crowding-out effect. The crowding-out effect occurs when increased government spending leads to higher interest rates, reducing private investment and offsetting the increase in aggregate demand. Therefore, while real GDP would be higher due to the immigration of skilled workers, the price level would be lower or remain the same as the crowding-out effect counteracts the increase in government purchases.
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Suppose the president of the United States is thinking of imposing tariffs on imported
steel to protect the interests of the domestic steel industry.As an economic
adviser to the president,whatwouldbe your recommendations?Howwouldyou
set up an econometric study to assess the consequences of imposing the tariff?
As an economic adviser to the president, my recommendations would be to analyze and evaluate the potential benefits and costs of imposing tariffs on imported steel. It is essential to determine the actual impact of tariffs on the domestic steel industry and other sectors of the economy. Here are a few recommendations to be considered when setting up an econometric study to assess the consequences of imposing the tariff: Identify the Objectives: The study should clearly define the goals and objectives of imposing tariffs on imported steel. It should examine whether the tariff will benefit the domestic steel industry, create jobs, reduce imports, or protect national security.
Conduct a Comparative Analysis:
It is essential to conduct a comparative analysis between the domestic and imported steel industry. The study should evaluate the domestic and imported steel prices, production capacity, and quality of the product. It should also examine the extent of competition in the domestic and international steel markets. Analyze the Impact of Tariffs: The study should evaluate the potential impact of tariffs on imported steel on other sectors of the economy. It should examine whether the tariffs will result in retaliation from other countries, which may result in a trade war. Additionally, the study should examine the impact of tariffs on the domestic consumers, downstream industries, and global supply chains.
Conduct a Cost-Benefit Analysis:
The study should conduct a cost-benefit analysis to evaluate the economic impact of imposing tariffs. It should examine the potential benefits of tariffs on the domestic steel industry and other sectors of the economy and compare them with the potential costs. The study should evaluate whether the benefits of tariffs outweigh the costs and provide a net gain for the economy.
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How many different federal taxes are listed?
Answer:
There are two types of taxes namely, direct taxes and indirect taxes.
Explanation:
12 specific taxes, four within each main category—earn: individual income taxes, corporate income taxes, payroll taxes, and capital gains taxes; buy: sales taxes, gross receipts taxes, value-added taxes, and excise taxes; and own: property taxes, tangible personal property taxes, estate and inheritance taxes, and wealth taxes.
Answer:
2!
Explanation:
direct taxes and indirect taxes! hope this helps! plz mark as brainliest!
if its repeated repeat the answer i cant find it 4.[25 MARKS] Consider a market with one producer and two distributors competing with each other. Each distributor buys from the producer at a unit cost equals to h.The market price of the product equals to p=100-qiq,where qis the quantity purchased from the distributor i e {1,2}Producer receives h(marginal revenue for each unit sold to distributors and has constant marginal cost of production equals to 5 Suppose that first the producer decides on the price h and then the distributors decide simultaneously on the quantity q and q which,respectively.they buy from the producer a[15 MARKS] Calculate the best response function for each distributor for given price h b [10 MARKS] Calculate the price h and the equilibrium quantity Q=qi+q on this market.
(a) The best response function for each distributor for given price h are:
BR1(h, q2) = qi= (1/2)*(100-h-q2)
BR2(h, q1) = q2= (1/2)*(100-h-q1)
(b) The equilibrium quantity Q = qi + q2 = 2qi = 2q2 = 40 and the equilibrium price p = 40 - Q/2 = 20.
The producer should set the price h = 10 to achieve this equilibrium.
(a) Best response function for each distributor for given price h:
The market price of the product equals to p = 100 - qi-q2 where qi and q2 are the quantities purchased from distributor 1 and 2, respectively.
The Producer receives h (marginal revenue for each unit sold to distributors) and has a constant marginal cost of production equal to 5.
Calculating the best response function for Distributor 1:
Here, the profit for Distributor 1 will be equal to the revenue it receives from the product minus the cost of production, which is equal to the purchase price (h) multiplied by the quantity (qi) and cost of production (5) multiplied by the quantity (Q-qi-q2).
Therefore, the profit of distributor 1, π1= 100qi- qi2 - qi h -5 (Q-qi-q2)
As both distributors are trying to maximize their profits, distributor 1 will choose qi in such a way that its profit is maximized.
So, the best response function of distributor 1 will be:
BR1(h, q2) = arg max (π1)=qi= (1/2)*(100-h-q2)
Calculation of best response function for Distributor 2:
Here, the profit for Distributor 2 will be equal to the revenue it receives from the product minus the cost of production, which is equal to the purchase price (h) multiplied by the quantity (q2) and cost of production (5) multiplied by the quantity (Q-qi-q2).
Therefore, the profit of distributor 2, π2 = 100q2 - q1q2 - q2 h - 5(Q-q1-q2)
As both distributors are trying to maximize their profits, distributor 2 will choose q2 in such a way that its profit is maximized.
So, the best response function of distributor 2 will be:
BR2(h, q1) = arg max(π2)= q2= (1/2)*(100-h-q1)
(b) Calculation of price h and the equilibrium quantity Q=qi+q:
For Nash equilibrium, the quantity supplied by both distributors should be equal to the quantity demanded by the market.
Therefore, Q = qi + q2 = 2qi = 2q2p = 100 - qi - q2 = 50 - Q/2
Using the above two equations, we can calculate the value of Q and p as follows:
Q = 40 and p = 30
Now, to calculate the value of h, substitute the value of Q in any of the best response functions.
Let's use the best response function of distributor 1:
BR1(h, q2) = qi = (1/2)*(100-h-q2)
Substituting Q=40, we get:
20= (1/2)*(100-h-q2)
40-h-q2 = 0h = 60 - q2
Substituting the value of h in the market price equation, we get:
p = 100 - qi - q2
p = 100 - q2 - (60 - q2) = 40 - q2
Now, since the producer has a constant marginal cost of 5, the value of h should be equal to 5 + MC, where MC is the marginal cost of production and equals 5.
So, h = 5 + 5 = 10
Therefore, the equilibrium quantity Q = qi + q2 = 2qi = 2q2 = 40 and the equilibrium price p = 40 - Q/2 = 20.
The producer should set the price h = 10 to achieve this equilibrium.
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Many companies have cyclical operating cash needs due to: O The seasonality of sales O Delays in customer payments O Mergers and acquisitions Refinancing of debt
Many companies have cyclical operating cash needs due to seasonality of sales, option B) delays in customer payments, mergers and acquisitions, and refinancing of debt.
In order to understand how the cyclical operating cash needs of companies arise, we need to understand what these terms mean:
Seasonality of sales refers to the fluctuations in a company's sales that occur within a year. Many businesses are seasonal, meaning that their sales peak during specific times of the year. For example, retailers often have higher sales during the holiday season. This can lead to cyclical operating cash needs since a company may have higher cash inflows during peak periods and lower cash inflows during other periods.
Delays in customer payments refer to the length of time it takes for customers to pay for the goods or services they have received. This can cause a company to have lower cash inflows in the short term and can lead to cyclical operating cash needs if customer payment delays occur on a regular basis.
Mergers and acquisitions refer to the process of one company taking over or merging with another. This can lead to cyclical operating cash needs if the companies have different cash flow patterns that need to be aligned.
Refinancing of debt refers to the process of a company restructuring its existing debt. This can lead to cyclical operating cash needs if the company needs to borrow additional funds to pay off its existing debt and if the timing of the refinancing causes fluctuations in cash inflows and outflows.
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Francum Company has the following data: direct labor $248,000, direct materials used $188,000, total manufacturing overhead $253,000, and beginning work in process $36,000.
-Compute total manufacturing costs.
Total manufacturing costs:_______________
Francum Company has the following data: direct labor $248,000, direct materials used $188,000, total manufacturing overhead $253,000, and beginning work in process $36,000. The total manufacturing cost is $689,000.
Total manufacturing costs can be computed by adding the direct labor, direct materials used, and total manufacturing overhead.
Given the data provided:
Direct labor: $248,000
Direct materials used: $188,000
Total manufacturing overhead: $253,000
To calculate total manufacturing costs:
Total manufacturing costs = Direct labor + Direct materials used + Total manufacturing overhead
Plugging in the values:
Total manufacturing costs = $248,000 + $188,000 + $253,000
Total manufacturing costs = $689,000
Therefore, the total manufacturing costs for Francum Company are $689,000.
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What is the role of a freight forwarder when assisting a client with an international payment transaction? a.To provide information on credit b.To identify and explain the payment risks c.To negotiate sales contracts d. To negotiate international payments
The role of a freight forwarder when assisting a client with an international payment transaction can be elaborated by the following explanation:
A freight forwarder, sometimes referred to as a forwarding agent, is a company or individual that manages and arranges the delivery of goods from the manufacturer to the final point of distribution. Freight forwarders are involved in the transportation of goods through multiple carriers, including air, sea, and land, and have the necessary expertise and resources to manage and handle the movement of goods across borders.Because freight forwarders handle a considerable volume of international trade shipments, they are well-versed in the nuances of international trade. In this regard, they play a critical role in assisting their clients with international payment transactions. Some of the roles of a freight forwarder when assisting a client with an international payment transaction include:
The provision of information on credit: Freight forwarders assist their clients in navigating the credit process by providing them with the information they need to make informed decisions on the best payment options. Freight forwarders are familiar with various modes of payment, including letters of credit (LCs), and can assist clients in negotiating favorable payment terms. Freight forwarders also provide their clients with advice on the creditworthiness of potential business partners.Identifying and explaining payment risks:
Freight forwarders are well-versed in the risks associated with international trade, such as currency fluctuations, interest rate risk, credit risk, and political risks. They can assist their clients in understanding the implications of these risks and in taking the necessary steps to manage and mitigate them.Negotiating sales contracts: Freight forwarders often act as intermediaries between buyers and sellers and can assist their clients in negotiating favorable sales contracts. They can advise their clients on the terms and conditions of the contract, such as the delivery terms, payment terms, and liability provisions.Negotiating international payments:
Freight forwarders can assist their clients in negotiating international payments by providing them with information on various payment options, such as LCs, open account, and documentary collections. Freight forwarders can also assist their clients in preparing the necessary documentation required for international payments, such as invoices, bills of lading, and export declarations.In summary, freight forwarders play a critical role in assisting their clients with international payment transactions by providing information on credit, identifying and explaining payment risks, negotiating sales contracts, and negotiating international payments.
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The Lansing Community College registrar's office is considering replacing some Canon copiers with faster copiers purchased from Kodak.
The office's 4 Canon machines are expected to last 5 more years. They can each be sold immediately for $1,300; their resale value in 5 years will be zero. The Canon machines require 4 operators; they are each paid $8.30 an hour and work 39 hours a week and 52 weeks a year. The machines break down periodically, resulting in annual repair costs of $1,260 for each machine. The cost of supplies for each machine will be $960 a year.
The total cost of the new Kodak equipment will be $111,000. The equipment will have a life of 5 years and a total disposal value at that time of $2,300. The Kodak system will require only 3 regular operators, working the same number of hours and earning the same wages. Kodak has offered the college a maintenance contract that covers all machine breakdowns; the cost of the contract is $960 per year. The cost of supplies for all the machines combined will be $3,120 a year.
Required
Assuming a discount rate of 14%, compute the difference between the net present value if the registrar's office keeps the Canon copiers and the net present value if it buys the Kodak copiers. [Note: If your results favor keeping the Canon copiers, enter your net present value difference as a positive number; if your results favor buying the Kodak copiers, enter your net present value difference as a negative number.]
The difference between the NPV of keeping the Canon copiers and the NPV of buying the Kodak copiers is $62,610.95.
IntroductionThe Lansing Community College registrar's office is considering the replacement of Canon copiers with Kodak copiers. The office's 4 Canon machines are expected to last 5 more years. The Canon machines require 4 operators; they are each paid $8.30 an hour and work 39 hours a week and 52 weeks a year. The machines break down periodically, resulting in annual repair costs of $1,260 for each machine.
The total cost of the new Kodak equipment will be $111,000. The equipment will have a life of 5 years and a total disposal value at that time of $2,300. Kodak has offered the college a maintenance contract that covers all machine breakdowns; the cost of the contract is $960 per year. The cost of supplies for all the machines combined will be $3,120 a year. The Kodak system will require only 3 regular operators, working the same number of hours and earning the same wages.Computation Discount rate = 14%
Net present value (NPV) for keeping the Canon copiers = -$27,711.44
Net present value (NPV) for buying the Kodak copiers = -$34,899.51 Difference between the NPV of keeping the Canon copiers and the NPV of buying the Kodak copiers
= NPV of keeping Canon copiers - NPV of buying Kodak copiers
= $34,899.51 - (-$27,711.44)
= $62,610.95
Therefore, the difference between the NPV of keeping the Canon copiers and the NPV of buying the Kodak copiers is $62,610.95.
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Pedro purchased a house and lot. A title was issued for the said property under the name of Pedro. The ICT was given to Juan, the duly authorized representative of Pedro. Unfortunately, Juan did not turnover the TCT to Pedro but instead it was use as a "prenda" (informal mortgage) and was given to Manuel. Pedro made demand but Manuel refused to surrender the same. How can Pedro recover the TCT from Manuel?
As Juan did not turnover the TCT to Pedro but instead it was use as a "prenda" informal mortgage, to recover the Transfer Certificate of Title (TCT) from Manuel, Pedro can take legal steps.
To recover the Transfer Certificate of Title (TCT) from Manuel, Pedro can take the following legal steps:
Consult an Attorney: Pedro should seek legal advice from an attorney specializing in property law or real estate. The attorney can guide Pedro through the legal process and provide specific advice based on the jurisdiction and applicable laws.Review Documentation and Evidence: Pedro should gather all relevant documents and evidence that establish his ownership of the property, such as the original purchase agreement, payment receipts, and any other relevant documents that prove his rightful ownership of the property.Demand Letter: Pedro's attorney can draft a formal demand letter addressed to Manuel, requesting the return of the TCT. The demand letter should outline Pedro's legal rights to the property, the fact that the TCT was unlawfully used as collateral, and the demand for its immediate return.Negotiation and Mediation: If the demand letter does not lead to the return of the TCT, Pedro's attorney may attempt negotiation or mediation between Pedro and Manuel. This can involve discussions and negotiations to resolve the matter amicably and avoid litigation.File a Lawsuit: If negotiation and mediation do not yield results, Pedro may need to file a lawsuit against Manuel to recover the TCT. Pedro's attorney will guide him through the legal process, including preparing the necessary legal documents, gathering evidence, and presenting the case in court.Court Proceedings: Pedro's attorney will present Pedro's case in court, arguing that the TCT rightfully belongs to Pedro and that its retention by Manuel is unlawful. The court will evaluate the evidence and legal arguments presented by both parties and make a decision based on the merits of the case.Court Order and Enforcement: If the court rules in favor of Pedro, it may issue a court order directing Manuel to return the TCT to Pedro. If Manuel continues to refuse, Pedro can seek legal assistance to enforce the court order, which may involve seeking assistance from law enforcement or engaging in further legal proceedings to compel compliance.To know more about mortgage follow the link:
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The difference between situational interviews and behavioral description interviews is that: a. behavioral description interviews are highly susceptible to applicant faking. b. behavioral description interviews are less effective than situational interviews for hiring high-level positions. c. situational interviews focus on hypothetical incidents rather than on actual work incidents. d. situational interviews assume that past performance is the best predictor of future performance.
Answer:
C) Situational interviews focus on hypothetical incidents rather on actual work incidents
Explanation:
situational interview give rooms to individual that is going through interview from interviewer to pass across his/ her expertise, talent as well as skills that could be used in overcoming any challenges that come with the job.
Behavior Description Interview on other hand utilize premise which goes that behavior of the past can be use in predicting the future, it uses a techniques that finds out what applicant has done in a kind similar situation in the past. It should be noted that one main difference between situational interviews and behavioral description interviews is that Situational interviews focus on hypothetical incidents rather on actual work incidents
Ace Frisbee Corporation produces a good that is in consolidation state in their product life cycles. Ace Frisbee Corporation is expected to pay a dividend in year 1 of $1.00, a dividend in year 2 of $2.00, and a dividend in year 3 of $3.00. After year 3, dividends are expected to grow at the rate of 7% per year. This company has a beta of 0.75. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. Using the multistage DDM.
a)What is the required rate of return?
b)What is the terminal value of the stock at end of year
c)What should be the price of the stock today?
a) The required rate of return can be calculated using the Capital Asset Pricing Model (CAPM). It is the risk-free rate plus the product of the stock's beta and the market risk premium. In this case, the required rate of return would be 6% + (0.75 * 8%) = 12%.
b) The terminal value of the stock at the end of year 3 can be determined by applying the Gordon Growth Model. Since the dividends are expected to grow at a rate of 7% per year after year 3, we can use the formula: Terminal Value = D4 / (r - g), where D4 is the dividend in year 4, r is the required rate of return, and g is the growth rate. In this case, the terminal value would be $3.00 / (0.12 - 0.07) = $60.
c) To calculate the price of the stock today, we need to discount the expected future dividends and the terminal value back to the present using the required rate of return. The formula for the price of the stock today is: Price = (D1 / (1 + r)) + (D2 / (1 + r)²) + (D3 / (1 + r)³) + (Terminal Value / (1 + r)³). Plugging in the values, the price of the stock today would be ($1.00 / 1.12) + ($2.00 / 1.12²) + ($3.00 / 1.12³) + ($60 / 1.12³) = $40.53.
In order to determine the required rate of return, we used the Capital Asset Pricing Model (CAPM), which takes into account the risk-free rate of return, the stock's beta, and the expected return on the market portfolio. The terminal value of the stock at the end of year 3 was calculated using the Gordon Growth Model, considering the expected growth rate of dividends. Finally, the price of the stock today was obtained by discounting the expected future dividends and the terminal value back to the present using the required rate of return.
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Overhead is applied to jobs at the rate of $25 per machine hour. By February 28, Job 178 is the only one unfinished. The balance of Finished Goods on February 1 is $94,000 (consisting of Job 177). Jobs 177 and 179 are sold during February. Stutz sells its product at cost plus 40%.
Calculate the balance of Finished Goods at February 28.
a.$53,290
b.$63,290
c.$63,690
d.$0
e.$39,500
The balance of Finished Goods at February 28 is $53,290.Option (a) is correct.
Given, Overhead is applied to jobs at the rate of $25 per machine hour. By February 28, Job 178 is the only one unfinished.
The balance of Finished Goods on February 1 is $94,000 (consisting of Job 177).
Jobs 177 and 179 are sold during February.
Stutz sells its product at cost plus 40%.
The cost of job 177 and 179 can be calculated as follows:
Job 177:
Overhead = $25 * 400 hours = $10,000,
Direct materials = $70,000,
Direct labor = $40,000,
Total cost = $120,000,
Job 179:
Overhead = $25 * 100 hours = $2,500
Direct materials = $17,500
Direct labor = $10,000
Total cost = $30,000
Total cost of jobs sold during February:
$120,000 + $30,000 = $150,000
Since Stutz sells its product at cost plus 40%, the revenue from the sale of jobs 177 and 179 is:
Revenue = Cost + 40% of Cost = $150,000 + $60,000 = $210,000.
Since job 178 is the only one unfinished, its cost can be calculated as follows:
Overhead = $25 * 250 hours = $6,250
Direct materials = $35,000
Direct labor = $20,000
Total cost of Job 178 = $61,250
The balance of Finished Goods at February 1 is $94,000.
Therefore, the total cost of Job 177 and the beginning balance of finished goods is:
$94,000 - $120,000 = -$26,000
This negative balance is because Job 177 is sold at a profit.
The negative balance is subtracted from the revenue from the sale of jobs 177 and 179 to calculate the ending balance of finished goods: Ending balance of Finished Goods = $210,000 - $26,000 + $61,250 = $245,250.
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Question 2 of 9 < 0.57/2 EI Prepare an incremental analysis showing whether the company should make or buy the switches. (Round per unit answers to 2 decimal places, eg 15.25. If an amount reduces the
It is more cost-effective for Windsor Company to buy the switches instead of making them.
Should Windsor Company make or buy the switches?To know cost-effectiveness of making or buying the switches, we need to compare the incremental costs for each option.
Making the switches:
Direct materials cost: $30,243
Variable overhead cost: $53,370
Direct labor cost: $42,696
Fixed overhead cost: $60,486
Total cost of making 59,300 switches:
Total cost = Direct materials + Variable overhead + Direct labor + Fixed overhead
Total cost = $30,243 + $53,370 + $42,696 + $60,486
Total cost = $186,795
Cost per unit of making = Total cost / Number of units
Cost per unit of making = $186,795 / 59,300
Cost per unit of making = $3.15
Buying the switches:
Cost per unit of buying = $2.95
We will now compare the incremental costs:
Incremental cost per unit = Cost per unit of making - Cost per unit of buying
Incremental cost per unit = $3.15 - $2.95
Incremental cost per unit = $0.20
Conclusion: Since the incremental cost per unit of making the switches is $0.20 higher than buying the switches, it is more cost-effective for Windsor Company to buy the switches instead of making them.
Full question:
Windsor Company must decide whether to make or buy some of its components. The costs of producing 59,300 switches for its generators are as follows.
Direct materials $30,243
Variable overhead $53,370
Direct labour 42,696
Fixed overhead 60,486
Instead of making the switches at an average cost of $3.15 ($186,795 ÷ 59,300), the company has an opportunity to buy the switches at $2.95 per unit. If the company purchases the switches, all the variable costs and one-third of the fixed costs will be eliminated. Prepare an incremental analysis showing whether the company should make or buy the switches.
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