Make-or-Buy Decision Making the Carrying cases would Be advised, assuming there were no better alternatives for using the extra capacity. Fixed overhead has no Impact on this choice of net income.
Alternative 1:
A. Create a carry case. $41.00
Alternative 2:
Obtain a carrying case $44.00
Alternative 2:
Various effects on net income ($3.00)
Make-or-Buy Decision:
A. Building a Differential Analysis
Differential analysis
Create a carry case. Obtain a carrying case
Alternative 1 & Alternative 2
Alternative 1 Alternative 2 Various effects on net income (Alternative 2)
Sales price
$0.00 $0.00 $0.00
Purchase Price
$0.00 $40.00 ($40.00)
Direct materials
$16.00 $0.00 $16.00
Direct labor
$20.00 $0.00 $20.00
varying manufacturing costs (20*5%=$1.00)
$1.00 $0.00 $1.00
Fixed manufacturing ($5.00-$1.00) $4.00 $4.00 $0.00
Income(Loss)
$41.00 $44.00 ($3.00)
The Company should select Alternative 1, a carrying case, based on net income the aforementioned computation.
The amount earned by an individual or business after costs, allowances, and taxes is referred to as net income.
Therefore, it would Be advised to construct the Carrying cases if there were no better alternative applications for the extra capacity. fixed overhead has No impact on this choice.
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• What is the number of units to be produced if the firm desires to make a cost per unit and profit of Birr10,000 assuming the fixed cost, variable selling price per unit are Birr50,000, Birr10 and Birr20 respectively
The number of units to be prod-uced if the firm desires to ma-ke a cost per unit and profit of Birr10,000 is 6000 units.
What is cost per unit?Cost per unit refers to bot-h the variable costs and fixed costs associa-ted with producing and deliver-ing a single unit of any pro-duct to an end consumer. Moni-toring your cost of goods sold helps cre-ate context to set pricing and en-sure profit is gener-ated.
Solution:
let assume the un-its to be prod-uced by X.
then sa-les (20X)= variable cost (10X) + fixed cost (50000) + profit (10000)
20X = 10X + 50000 + 10000
X = 6000 units
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Your friend is married, owns a home, and has two children. He wants to get the most insurance possible for the cheapest rate. Which policy would you recommend?
Answer:
Term life insurance
Explanation:
What does term life insurance mean?
A term life policy is a contract between you and an insurance company for a defined period, typically between 10 and 30 years. During that term, you promise to pay a premium each month. In return, the company promises to pay a specific amount of money – a death benefit – if you pass away during the term.
Answer:
He wants to get the most insurance possible for the cheapest rate
Explanation:
the cheep ome
a 5 year, zero-coupon bond has a maturity of $1000 and a present market price of $713. Its duration in years is
a. 4.7
b. 5
c. 4.2
d. 3.9
The duration in years of a 5-year zero-coupon bond with a maturity of $1,000 is B. 5.
What is the duration of a bond?
The duration of a bond refers to its maturity period starting from the issuance date.
The duration of a bond measures the likely price changes that may happen with interest rate changes, thereby measuring the interest rate risk inherent in the bond.
Calculating the duration of a bond enables investors to gauge how changes in the interest rate affect the bond's price.
At the end of the bond's duration, the face value is expected to be repaid to the bondholder.
However, within the intervening periods, the bond attracts periodic interest payments unless it is a zero-coup bond, whose market price is always less than the face value.
A 5-year bond does not have a duration of 4.7, 4.2, or 3.9 years.
Thus, the bond's duration is Option B, usually five years from the issuance date.
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Helppp pleaseeeeeeeeeee
All Markup
All markup shows your changes with various text and line colors.
What is Markup?
A text or word processing file's markup is the sequence of letters or other symbols you insert at specific locations to specify how the file should appear when printed or displayed or to define the logical structure of the document. "Tags" are the markup indicators' common name.
How to start Markup?
From the Review tab, click the Display for Review command to the right of the Track Changes command. Select the desired option from the drop-down menu.To know more about Markups refer
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What steps can you use to unprotect a form so you can make changes to it?
1. In the Restrict Editing pane, click
.
2. Type the
, and click OK.
3. Under
, remove the check mark to unprotect the form.
The necessary steps to use to unprotect a form so you can make changes to it are:
1. In the Restrict Editing pane, click the Protect group.
2. Type the Protect Document and click OK.
3. Under Protect Document, remove the check mark to unprotect the form.
What is a form protection?It is a form of tiny, simple and non-invasive spam protection for online forms. The protection, is most based on the assumption that spam bots are not running JavaScript when loading targeted forms.
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Answer:
1. In the Restrict Editing pane, click ✔ Stop Protection
2. Type the ✔ password and click OK.
3. Under ✔ Editing restrictions, remove the check mark to unprotect the form.
Though these two types of estates can be broken down even further, what are the two basic types of
freehold estates?
fee simple estates and life estates
dower/curtesy estates and absolute estates
fee simple estates and dower/curtesy estates
absolute estates and life estates
The two basic types of freehold estates are fee simple estates and life estates.
The required details about freehold estates is mentioned in below paragraph.
Freehold estates are estates of indefinite period that may exist for an entire life or all the time. Some kinds of freehold estates are labeled as "estates of inheritance," in which the property keeps past the lifestyles of the holder and descends to their residing heirs upon dying as distinct through the desire or through law.A freehold property is possession in belongings. To be taken into consideration a freehold property, standards need to be met:
Immovable: The asset can not be moved; therefore, it's miles both land or a few form of hobby in that land.
No constant period of possession: The belongings may be exceeded on all the time if the proper standards are met. There isn't anyt any set timeline for possession withinside the belongings to expire.
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The ______________ of an excise tax depends on the ________ of the taxed good's supply and demand curves.
The incidence of an excise tax depends on the price elasticity of the taxed good's supply and demand curves.
How really do extract charges influence the stockpile bend?
One of the six factors that affect supply is the tax on excise. Hey, move the supply curve to the left, increasing the equilibrium price while decreasing the supply. The supply curve will change until the tax equals the vertical distance between the two curves.
Expense Tax A tax on the sale of a product or service is called an excise tax. The excise tax creates a gap between consumers' and producers' prices, resulting in a reduction in transaction volume.
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What are the three main factors that search engines look for when
delivering results on the search engine results page?
1.
2.
3.
Three main factors that search engine look for are Relevance, Distance, Prominence.
Relevance- The term refers to how well a website's information corresponds to a search query. Relevance criteria include visible text, images, and videos as well as content elements. Furthermore, meta elements such as title, meta description, and alt tags can be used to generate relevance.
Distance- Based on the user's browser information, distance determines how close the search user is to local businesses. The greater the distance between the search user and a local business, the more likely that business will appear in the local maps results.
Prominence- The location of a keyword on a page is said to influence search rankings. SEO experts recommend using the target keyword of a page early in order to benefit from a ranking signal known as keyword prominence.
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Jansen Company’s general ledger showed a checking account balance of $25,020 at the end of May 2021. The May 31 cash receipts of $2,460, included in the general ledger balance, were placed in the night depository at the bank on May 31 and were processed by the bank on June 1. The bank statement dated May 31, 2021, showed bank service charges of $50. All checks written by the company had been processed by the bank by May 31 and were listed on the bank statement except for checks totaling $2,010. Required: Prepare a bank reconciliation as of May 31, 2021. [Hint: You will need to compute the balance that would appear on the bank statement.]
$24,520 is the balance in a bank reconciliation as of May 31, 2021. The goal of this process is to determine the differences between the two and, as necessary, make changes to the accounting records.
What is the journal entry for bank reconciliation?When there are changes to the balance on the books, journal entries are required in a bank reconciliation. These adjustments are the result of bank statement items that were not recorded in the company's general ledger accounts.
Given
Bank Balance = $25,020
Cash Receipts = -$2460
Bank Charges = - $50
Collection = + 2010
Bank balance after reconciliation = $24,520
Bank reconciliations are an important internal control tool for preventing and detecting fraud. They also aid in the identification of accounting and banking errors by explaining the differences between the cash balances on the accounting record and the bank balance position on the bank statement.
Thus, the balance of $24,520 is shown in the bank account.
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Which of the following statements is true of investments in training?
Answer: Option A
Explanation:
Instructors, both full-time staff members and individuals hired on a contract basis, typically represent the biggest cost of training
Please I need help with this exercise, I'm struggling so hard!
Based on this table from week 1 (Table2 attached).
-During the second week of business, the following transactions, all through the business bank account as appropriate, took place:
i. On 8 October M paid by cheque a quarter of the money owing on her payables account.
ii. On 11 October M paid by cheque £600 for two weeks’ rent for her business premises.
iii. On 11 October M paid by cheque £250 for two weeks’ insurance.
iv. By the end of the day on the 14 October (i.e. after two weeks of trade), M had made sales for £4,000. Fifty per cent of the sales had been in cash and the rest on credit. M had sold all her inventory after these two weeks of trade.
Using the new template below, demonstrate how the transactions in the second week will affect the expanded accounting equation (Assets = Capital + (Income – Cost of Sales – Expenses) + Liabilities. Your answer should include a summary total for each of the Assets, Capital, and Liabilities at the beginning of the second week, i.e. from your answer to part (a), as well as at the end of the same week.
(Template attached as TableToFollow).
Thank you sooo much!
A demonstration of how the transactions in the second week will affect the expanded accounting equation is as follows:
Assets = Capital + (Income – Cost of Sales – Expenses) + Liabilities
Balance from
Week 1 £16,430 = £14,930 + £1,500
1. -375 -375
2. -600 £ -600
3. -250 -250
4. 4,000 £4,000
4. -1,500 £1,500
Bal. £17,705 = £14,930 + £4,000 - £1,500 - £850 + £1,125
Bal. £17,705 = £16,580 + £1,125
What is the accounting equation?The accounting equation is a statement that assets are always equal to capital or equity plus liabilities, given each business transaction.
Also known as the balance sheet equation, the accounting equation is the basis for the double-entry system of accounting.
Transaction Analysis:1. Accounts Payable £375 Bank £375
2. Rent Expense £600 Bank £600
3. Insurance Expense £250 Bank £250
4. Cash £2,000 Accounts Receivable £2,000 Sales Revenue £4,000
4. Cost of goods sold £1,500 Inventory £1,500
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Lannister Manufacturing has a target debt-equity ratio of 0.57. Its cost of equity is 21 percent, and its cost of debt is 10 percent. If the tax rate is 34 percent, what is the company's WACC?
Multiple Choice
16.56%
11.83%
14.98%
12.79%
15.77%
The Weighted average cost of capital (WACC) is E. 15.77%.
How to find the weighted average cost of capital (WACC)?Using this formula to find the WACC
WACC = Weighted of debt × cost of debt × (1- tax rate) + Weighted of equity × cost of equity
Let plug in the formula
WACC = (1/1.57)(.21) + (.57/1.57)(.10)(1 − .66)
WACC = 0.13375 + 0.02396
WACC = 0.1577 × 100
WACC = 15.77%
Therefore the correct option is E.
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Please help me with this question
The confidence interval excludes zero, there is evidence that the vacancy rates in the two cities differ.
The confidence level= 0.90
The significant level α = 0.10
City 1:
The sample proportion:
∧
P1= 27/175
= 0.1543
City 2:
The sample proportion:
∧
P2= 13/145
= 0.0897
Critical value of Z
Z critical= z0.05
≈±1.645
90% confidence interval:
∧ ∧
P1-P2= (P1-P2) ±z√ [ p1(1-p1)/n1+ p2(1-p2)/n2]
= (0.543- 0.0897) ± 1.645√ [ 0.1543× (1-0.1543) + 0.0897× (1-0.0897)]
= 0.0646±0.595
0.0051≤(p1-p2) ≤0.1241
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Direct labor is ______.
Direct Labour is the sum of money given to employees who are directly involved in the manufacturing of items. It varies in direct proportion to production level.
What distinguishes direct from indirect labour?
Only labour engaged in the manual production of products and services is regarded as direct labour, which is how direct labour differs from indirect labour. Indirect labour is the default classification for all other work.Is the cost of direct material fixed?
A prime example of a variable cost is the price of direct materials. Remember that a fixed cost is one that keeps the same overall and reduces as a result per unit as the activity level rises.What is an example of indirect labour?
The production manager, the buying staff, the material handling staff, the material management staff, and the quality control staff are a few examples of indirect labour employment.To know more about labour, check out this link:
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If a firm wants to know why valuable employess are leaving the company, it will conduct
It will conduct exit interviews. This will assist you in determining why your staff are departing for alternative chances. A firm is a for-profit commercial organisation that provides professional services, such as a corporation, limited liability company (LLC), or partnership.
When you characterise someone as firm, you mean they act in a way that indicates they are not going to change their views or that they are in control. She needed to be tough with him. 'I don't want to see you anymore.' A firm is a business that sells services and products for profit, typically professional services. A firm, on the other hand, is a business that engages in any revenue-generating activity that involves the selling of goods and services.
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International trade is fundamentally a ________________________.
a. win-lose situation
b. lose-lose situation
c. win-win situation
d. war which is won by the strongest
International trade, at its core, is a win-win arrangement. Hence, the right option is (c.) a win-win situation.
What is International trade?International trade is the exchange of commodities and services between countries. Because of global commerce, people and countries have access to commodities and services that are either unavailable or more expensive in their own countries.
Tariffs, quotas, and nontariff barriers are the most frequent forms of trade restrictions. In international trade, a tariff is a federal government-imposed import tax that boosts the price of an item for the customer. Tariffs, sometimes known as levies or import charges, often begin by imposing limits on certain items.
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Check My Work
A random telephone survey of 1,037 adults (aged 18 and older) was conducted by Opinion Research Corporation on behalf of CompleteTax, an
online tax preparation and e-filing service. The survey results showed that 782 of those surveyed planned to file their taxes electronically.
a. Develop a descriptive statistic that can be used to estimate the percentage of all taxpayers who file electronically.
1% (to nearest whole number)
b. The survey reported that the most frequently used method for preparing the tax return was to hire an accountant or professional tax preparer. D
50% of the people surveyed had their tax return prepared this way, how many people used an accountant or professional tax preparer?
(to nearest whole number)
c. Other methods that the person filing the return often used include manual preparation, use of an online tax service, and use of a software tax
program. Would the data for the method for preparing the tax return be considered categorical or quantitative?
- Select your answer --
a) 75.4%
b) 613
c) The data for method of preparing the tax return would be a categorical.
Given that: survey shows 782 of 1037 people would most likely file electronically.
a) To estimate the percentage of all taxpayers who file electronically, we say; (782 / 1037) * 100% = 0.754 = 75.4%.
Given that: 50% said they would use professionals,
b) Now to find how many people did it this way, we say;
( 50 / 100) * 1037 = 518.5 = 518 (we are talking about number of person)
c) Apart from hiring accountant or professional for tax preparation, manual preparation can also be done. Also there are other methods like online tax service or software tax programme. So the data for method of preparing the tax return would be a categorical as the observations can be grouped in different tax preparation methodology category.
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A silver mine can yield 10,000 ounces of silver at a variable cost of $32 per ounce. The fixed costs of operating the mine are $40,000 per year. In half the years, silver can be sold for $48 per ounce; in the other years, silver can be sold for only $24 per ounce. Ignore taxes. a)What is the average cash flow you will receive from the mine if it is always kept in operation and the silver is always sold in the year it is mined? b)Now suppose you can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine?
The Average cash flow for Question A is $314,000.
The Average cash flow for Question B is $100,000.
What is an Average cash flow?This refers to the average amount of cash or cash-equivalent which a company receives or gives out by the way of payments to creditors.
The average cash flow to receive from the mine if it is always kept in operation and the silver is always sold in the year it is mined is computed as follows:
Average cash flow:
= (Best-case cash flow × % of time) + (Worst-case cash flow × % of time) - Variable costs - Fixed costs
= ($48 * 10,000 * 0.50) + ($24 * 10,000 * 0.50) - ($12,000 * 0.50) - $40,000
= $314,000
Supposing we can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine is as computed as follows:
Average cash flow:
= (Best-case cash flow × % of time) + (Worst-case cash flow × % of time) - Variable costs - Fixed costs
= ($48 * 10,000 * 0.50) + $0 - ($24 * 10,000 * 0.50) - ($40,000 * 0.50)
= $100,000
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A parallel interface standard that allows you to connect multiple devices to
a single interface adapter in a daisy chain configuration.
A multiline channel that has multiple lines capable of simultaneously sending data is referred to as a parallel interface. Most personal computers (PCs) have at least one parallel interface for attaching a printer using a parallel connection until USB ports became widely used.
Parallel interface Standard:
A serial port is an interface that enables a personal computer (PC) to send and receive data via a network of connected peripheral devices, such as a printer, using numerous cables. The Centronics port, used mostly for printers, is the most popular parallel port.
A wiring design known as a "daisy chain" in electrical and electronic engineering is one in which several devices are connected in a row or ring, resembling a garland of daisy blossoms. Power, analog signals, digital data, or any mix of the three may be transmitted using daisy chains.
A daisy chain is a sort of network topology that governs the connections between network nodes, which are usually computers. Different network topologies enable goals including fault tolerance, persistence, and simplicity of use.
The Centronics parallel interface, created and used in the Centronics 101 model printer in 1970, was the first parallel interface. This became the norm, although several types of wires were needed. Up to 50-pin connectors were produced by businesses including Dataproducts.
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An example of secondary research is
Answer: ''textbooks, encyclopedias, news articles, review articles, and meta analyses.''
Explanation:
Authors may use data from scholarly publications, official records, statistical databases, and historical documents when conducting secondary research.
What is a detailed plan that determines what change will happen, who will do it, and when it will occur?
action plan
objectives
strategies
safety
The correct answer for this question is Action Plan.
An action plan is a detailed timeline of necessary steps/procedures needed to be taken to reach a certain goal or objective. It is an integral part of business planning and operations.
Each step proposed in the plan is allocated a specific time, human resources, other resources, possible challenges, and the desired objective of that step.
It is a complete step-by-step guideline, assigning responsibilities and deadlines to ensure effective use of time and resources to achieve intended results.
An action plan is necessary in any business, project, and management planning; and is one of the most useful tools in the business management arsenal.
Therefore the answer to the aforementioned question is Action Plan.
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defining the problem gathering information evaluating information selecting the best option taking action Part A You are trying to decide what you want to major in during your college years. How should you go about making this decision?
When trying to decide the major you want in your college years, you should go about the decision by selecting the best option.
Deciding your college major?To decide your college major, you need to apply the steps in the Decision - making process which are:
defining the problem gathering information evaluating information selecting the best option taking actionThe first step would be to define the problem which is that you need to pick a college major that fit into your plans for life and that you would actually be interested in.
Then, you need to gather information of the various majors available. This is an exhausting step because you'll have to talk to your family and friends, attend college preparation fairs, talk to your guidance counselor, do research online etc.
Once you find out different majors, you then need to evaluate the information that you have to see how they fit into your plans. From this evaluation, you then select the best major for you or at least have a shortlist of 3 courses. Then take action by applying to colleges with these majors in mind.
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Dr. Mark Scholz places an order to purchase $300 worth of supplies that he will use in his animal hospital over the next six months. The supplier's terms are COD (Cash on Delivery). Which accounting transaction below is correct?
The correct accounting transaction is below:
DR Supplies $300
CR Cash $300
A journal entry is recorded when a transaction takes place, the company records each transaction of the company in accounts as journal entry, these entries are then converted into T-Accounts from which the trial balance is prepared which ultimately helps in the preparation of the Income Statement and Balance Sheet.
The entry that needs to be posted for the Dr. Mark Scholz's order is
DR Supplies $300
CR Cash $300
As the cash is paid on delivery so there will be one transaction recorded for the addition of the supplies as debit and the cash will be credited. This transaction will not include accounts payable because this is a cash transaction and not on credit.
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Identify a product you use that have increased or decreased in supply recently. How did the change in supply affect the price? Try to show it on a graph.
Books and Audio Books are the products that have increased in supply recently. The price is much lower that its demand increased a lot leading to increase in supply to catch up the increasing demand.
Reason:
Nowadays, many online platforms and stores have apps that provide their consumers with incentives and prizes. With the help of the Libby app, you may typically access library books and podcasts from your phone for no cost. By logging in with their public library card, users can check out e-books.
As the supply for books has increased one can get books at cheaper prices than usual
Some sites provides free e-books, which results in tons of free books supply.
What is law of supply?
According to the law of supply, manufacturers will increase their supply to the market if the price is higher.
Businesses produce more of a good or service when they anticipate paying a greater price for it because they want to boost their revenue.
In the meanwhile, suppliers are discouraged from manufacturing as much if prices drop.
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Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million and is depreciated straight-line over 10 years to a salvage value of zero. a) What is the accounting break-even level of sales in terms of the number of diamonds sold? Note: Do not round intermediate calculations. b) What is the NPV break-even level of sales assuming a tax rate of 21%, a 10-year project life, and a discount rate of 12%? Note: Do not round intermediate calculations. Round your answer up to the nearest whole unit.
The accounting break even is 5,000.
The NPV breakeven level of sales is 7,510.
What are the breakeven points?
Breakeven quantity are the number of units produced and sold at which net income is zero
Breakeven quantity = (depreciation + fixed cost) / price – variable cost per unit
Depreciation = (cost of the asset - salvage value) / useful life
Depreciation = ($1,000,000 - 0) / 10 = $100,000
Breakeven quantity = ($100,000 + $200,000) / ($100 - $40)
Breakeven quantity = $300,000 / $60 = 5,000
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
Cash flow = (sales revenue - variable cost - fixed cost ) x (1 - tax) + (depreciation x tax)
Cash flow = (100d - 40d - $200,000) x (1 - 0.21) + (100,000 x 0.21)
Cash flow = (60d - $200,000) x 0.79 + 21,000
Cash flow = 47.4d - $158,000 + 21,000
Cash flow = 47.4d - $179,000
When NPV is break-even, it would have a value of 0.
Thus, cost of the asset =present value of the cash flows in 10 years
1,000,000 = (47.4d - $179,000) x (1 - (1 + r)^-n] / r
1,000,000 = (47.4d - $179,000) x (1 - (1.12)^-10] / 0.12
1,000,000 = (47.4d - $179,000) x5.650223028
1,000,000 = 267.81d - 1,011,350
1,000,000 + 1,011,350 = 267.81d
2,011,350 = 267.81d
d = 2,011,350 / 267.81
d = 7,510
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Question 9 of 10
Governments can cause the supply of a good to decrease by:
OA. funding training related to making the good.
B. investing in new technology to produce the good.
C. reducing the taxes paid to make the good.
D. adding expensive regulations on the good.
SUBI
Answer:
D
Explanation:
hope this helps I'm not sure if it's correct
Following this weekend's attack on a Saudi oil field, a headline reads: "Oil prices to skyrocket reducing demand."
Respond to the two claims in the headline:
1) Are oil prices likely to rise? Why or why not?
2) Is demand likely to fall? Why or why not?
As regards the price of oil rising, the claim is true because the supply of oil would fall as a result of the attack on the Saudi oil field.
The demand is not likely to fall as oil is a highly demanded product which means that people will still demand it regardless of price.
How is demand affected by terrorist attacks?When there is an attack on a company or organization that produces a certain good or service, there is a likelihood that supply would fall. This is simply because the company would likely be able to produce less than what it has been producing before. This would lead to less products available for more people and so prices would rise.
This is what would happen in the situation where there was an attack on a Saudi Oil Field. The Saudis would only be able to produce less oil which would then lead to a price increase in oil. However, the demand is not likely to fall from this increased price because oil is a highly demanded product by people across the world.
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Integrated Potato Chips just paid a $1 per share dividend. You expect the dividend to grow steadily at a rate of 4% per year.
If you buy the stock and plan to sell it three years from now, what are your expected cash flows in (i) year 1; (ii) year 2; (iii) year 3?
1st yr - 1.04, 2nd yr - 1.08, 3rd yr - 1.12.
The entire quantity of money that enters and exits a business would be known as the cash flow. It serves as a crucial sign of how financially sound your company is. You could invest in new prospects, pay expenditures, and expand your firm with a steady, positive cash flow.
The expected cash flows is the dividend payable at a certain date in the future. To determine the value, we multiply the dividend at a certain time by the expected growth rate.
Year Workings Expected cash flows
1 1 × 1.04 = 1.04
2 1.04 × 1.04 = 1.08
3 1.08 × 1.04 = 1.12
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On November 1, 20X1, Gerakos Corporation sold software and a six-month technical support contract to a customer for $80,000. Gerakos sells the same software without technical support for $60,000. It sells technical support for $30,000. Gerakos allocates the transaction price based on relative stand-alone values.
Required:
What amount of revenue does Gerakos recognize in 20X1 and in 20X2? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
The amount of revenue does Gerakos recognize in 20X1 is $62,222 and in 20X2 $17,778
What is Transaction price?Transaction price is the pricing that is used when two products are sold together at a discounted price, the transaction price needs to be determined based on the stand alone prices of the products and then allocating the actual sales amount.
Transaction price determines the amount that needs to be recorded in a single period, and therefore is an important step to be performed in case of combo sales at discounted prices.
The calculation is as follows,
$60,000 + $30,000 = $90,000
Software $80,000 * ($60,000 / $90,000) = $53,333
Technical Support for 6 months $80,000 * ($30,000 / $90,000) =$26,667 * 2 / 6 = $8,889. (Multiplied with 2 months out of 6 months)
20X1
$53,333 + $8,889 = $62,222
20X2
$26,667 - $8,889 = $17,778
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In this example, Daniel & Claire each deposited $10,000 in high interest savings accounts and each earned 5% interest annually. Daniel’s ROI remained the same each year while Claire’s increased each year. What type of interest did Daniel’s bank pay? What type of interest did Claire’s bank pay?
1. Daniel's bank pay paid the regular simple interest, which does not compound on accumulated interest.
2. On the other hand, Claire's bank pay was paying a compounding interest on her savings account.
What is the difference between simple and compounding interests?Simple interest is based on the regular interest rate, which does not compound accumulated interest.
The simple interest system applies the interest rate periodically on the principal without adding the accumulated interest.
On the other hand, compound interest adds accumulated interest to the principal before applying the interest rate to the sum each period.
For illustration:
Daniel's simple interest for two years:
= $10,000 x 5% x 2
= $1,000
ROI after 2 years = 10% ($1,000/$10,000 x 100)
Claire's compound interest for two years:
= $10,000 x 1.05^2
= $10,000 x 1.1025
= $11,025
= $1,025 ($11,025 - $10,000)
ROI after 2 years = 10.25% ($1,025/$10,000 x 100)
Thus, Claire's return on investment (ROI) is greater than Daniel's.
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