Answer:
The price of the bond at issuance is $973.
Explanation:
The selling price of the bond is equal to the present value of all cash flow received from the holding the bonds to maturity, at the issuance time. Thus, these cash flows would be discounted at the annual market rate at the time it is sold which is 5%.
Holding the bond would generate 2 types of cash flows:
+ Annual coupon payment at the end of each year at Face value x coupon rate = 1000 x 4% = $40, for 3 year. Present value of this cash flow = [ 40 / 5%] x [ 1 - (1+5%)^(-3)] = $109
+ Face value payback at the end of 3 year whose present value = 1000 / 1.05^3 = $864
=> Selling price = 109 + 864 = $973.
Garson, Inc. produces three products... Garson, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:
Product
F G H
Selling price $100 $ 80 $110
Variable costs $60 $50 $65
Fixed costs $10 $5 $7
Milling machine time (minutes) 10 6 5
Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,800 minutes of milling machine time available this week.
Required:
a. Given the milling machine constraint, which product should be emphasized?
b. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of milling machine time?
Answer and Explanation:
The computation is shown below:
a.
Particulars F G H
Selling price (a) $100 $80 $110
Variable costs (b) -$60 -$50 -$65
Contribution Margin $40 $30 $45
Milling machine time
(minutes) 10 6 5
Contribution Margin
per minute $4 $5 $9
based on the above calculation, the product H should be emphasized as it has the highest contribution margin per minute
b. The price the company should pay is
= $9 × 60 minutes per hour
= $540
The Orange Lily Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $2,880 for six months of advertising. Orange Lily Law Firm recorded $2,880 in the Prepaid Advertising account.
Required:
If Orange Lily Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28?
Answer:
$2880;$960
Explanation:
Calculation to determine how much advertising expense would they have recorded for the two months ending February 28
UNDER THE CASH BASIS, the Law Firm will record $2,880 of advertising expense for the two months ending February 28
UNDER THE ACCRUAL BASIS, the Law Firm will record $960 of advertising expense for the two months ending February 28.l Calculated as:
Advertising expense=$2,880/6*2
Advertising expense=$960
The case explains that newly-hired CEO Ron Johnson quickly ordered the alteration of all stores to remove discount racks and add premium items. According to the case, that change and others signaled the move from a _________ strategy to a ________ strategy.
Answer:
cost-leadership; blue ocean
Explanation:
From the question we are informed about the case explains that newly-hired CEO Ron Johnson quickly ordered the alteration of all stores to remove discount racks and add premium items. According to the case, that change and others signaled the move from a cost-leadership strategy to a blue ocean strategy.
Cost leadership can be regarded as strategy where there is establishment of a competitive advantage as a result of having the lowest cost of operation in a particular the industry by a firm, in this case, it is possible for a firm to be
lowest cost producer but at same time it doesn't offer lowest-priced products or services.
Blue Ocean Strategy can be regarded as a strategy used in a market in a case whereby where there exist no competition or there is very less competition for a particular product market. This strategy involves searching for a business whereby few firms operate it and pricing pressure is minimal or doesn't exist.
Ellen Co. has offered their customers a 1% discount off the amount owed if they pay within 15 days of receiving their bill. Handler Company owed Ellen Co. $2,185 as of May 1st and paid Ellen Co. on May 7th. How much cash did Handler Company send to Ellen Co. on May 7th?
Answer:
Money send to Ellen = $2163.15
Explanation:
Discount offered by the Ellen Co. = 1%
Owed amount = $2185
Since the amount is repaid within 15 days to the offer of a 1% discount will be applicable. So the Handler will send an amount that is 1% less than the actual amount.
Money send to Ellen = 2185 - (1% x 2185)
Money send to Ellen = $2163.15
Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020. Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Answer:
Net increase in cash = $650
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question. See the attached pdf for the complete question.
Also note: See the attached excel file for the statement of cash flows using the indirect method.
From the attached excel file, we have:
Net cash flow from operating activities = $830
Net cash flow from investing activities = $30
Net cash from financing activities = -$210
Net increase in cash = $650
Astro 19,300 units of its only product and incurred a $ 54,940 loss ( ignoring taxes ) for the current year , as shown here During a planning session for year 2020's activities , the production manager notes that variable costs can be reduced 40 % by installing a machine that automates several operations . To obtain these savings , the company must increase its annual costs by . The maximum output capacity of the company is units per year . \$143,000; 40, 000 ASTRO COMPANY Contribution Margin Statement For Year Ended December 31 , 2019 719,240 costs Contribution margin (532, 680)/(177, 560); 232, 599; 5(54, 948) Repuired . 1. Compute the break even point in dollar sales for 2019 ( Round your answers to 2 decimal places . )
Answer: $682,727.27
Explanation:
Sales price is given as $36.80 per pair and variable costs are $27.60 per pair.
Break Even Point in dollars = Fixed Cost / Contribution margin ratio
Fixed costs = Old fixed costs + increase
= 232,500 + 143,000
= $375,500
Contribution margin = Selling price - Variable cost
Variable costs are to reduce by 40%:
= 36.80 - (27.60 * (1 - 40%))
= $20.24
Contribution margin ratio = Contribution margin / Selling price
= 20.24 / 36.80
= 55%
Break Even Point in dollars = 375,500 / 55%
= $682,727.27
Clem is married and is a skilled carpenter. Clem’s wife, Wanda, works part-time as a substitute grade school teacher. Determine the amount of Clem’s expenses that are deductible for AGI this year (if any) under the following independent circumstances:___________a) Clem is self-employed and this year he incurred $525 in expenses for tools and supplies related to his job. Since neither were covered by a qualified health plan, Wanda paid health insurance premiums of $3,600 to provide coverage for herself and Clem (not through an exchange).b) Clem and Wanda own a garage downtown that they rent to a local business for storage. This year they incurred expenses of $1,250 in utilities and $780 in depreciation.c) Clem paid self-employment tax of $15,300 (the employer portion is $7,650), and Wanda had $3,000 of Social Security taxes withheld from her pay.d) Clem paid $45 to rent a safe deposit box to store his coin collection. Clem has collected coins intermittently since he was a boy, and he expects to sell his collection when he retires.
Answer:
A. $4,125
B. $2030
C. $9650
D. $0
Explanation:
Calculation to determine the amount of Clem’s expenses that are deductible for AGI this year
A. AGI=Tools and supplies + Health insurance
AGI=$525+$3600
AGI=$4125
Therefore the amount of Clem’s expenses that are deductible for AGI this year is $4125
B. AGI=Tools and supplies +Health insurance ar
AGI=$1,250 +$780
AGI=$2030
Therefore the amount of Clem’s expenses that are deductible for AGI this year is $2030
C. Based on the information given, the EMPLOYER PORTION of the amount of $7,650 will be the EMPLOYER PORTION of the self-employment tax is deductible.
D. Based on the information given The amount of Clem’s expenses that are deductible for AGI this year is $0 reason been that The safe deposit fee is an ITEMIZED DEDUCTION .
Short Company purchased land by paying $27,000 cash on the purchase date and agreed to pay $27,000 for each of the next seven years beginning one-year from the purchase date. Short's incremental borrowing rate is 7%. On the balance sheet as of the purchase date, after the initial $27,000 payment was made, the liability reported is closest to:_________.
a. $117,700.
b. $189,000.
c. $145,511.
d. $172,511.
Answer:
c. $145,511
Explanation:
Present value of Payment = Amount*PVADF at (7%, 1)
Present value of Payment = $27.000*6.38929
Present value of payment = $172.511
Liabilities reported after initial payment = $172,511 - $27,000
Liabilities reported after initial payment = $145,511
Use following information to answer Q31-Q35
A firm produces output according to the following function: q = f(L,K) = L0.5K0.5 . The cost of labor is $4 per hour and the rental cost of capital is $12 per hour. The production function exhibits
A. constant returns to scale.
B. increasing returns to scale.
C. decreasing retums to scale.
D. increasing returns to scale for small levels of output, then constant retums to scale, and eventually decreasing returns to scale as output increases,
Answer:
A. Constant returns to scale.
Explanation:
In the given output function the labor and capital both have function of 0.5 which means if more labor is required then more capital needs to be injected. In the current output there is constant return to scale as labor and capital both are equally employed.
A firm currently produces 1000 units of output and has total costs of $15,000 and fixed cost of $3,000. What is the firm’s average variable costs?
Explanation:
Explanation: The formula is ATC = AFC + AVC. Use this formula. It will be useful for you
During the month of March, Harley's Computer Services made purchases on account totaling $43,500. Also during the month of March, Harley was paid $8,000 by a customer for services to be provided in the future and paid $36,900 of cash on its accounts payable balance. If the balance in the accounts payable account at the beginning of March was $77,300, what is the balance in accounts payable at the end of March?
a. $6,600
b. $75,900
c. $83,900
d. $91,900
Answer:
c. $83,900
Explanation:
The computation of the balance in accounts payable at the end of March is given below;
Opening Balance $77,300
Add: Purchases made $43,500
Less: Cash Paid $(36,900)
Closing Balance $83,900
hence, the balance in accounts payable at the end of March is $83,900
Therefore the option c is correct
Complete the following data taken from the condensed income statements for merchandising Companies X, Y, and Z. For those boxes in which you must enter negative numbers use a minus sign.
Company X Company Y Company Z
Net income/(net loss) $30 $_____ $(20)
Sales _____ 1,270 970
Gross profit 245 _____ 525
Operating expenses _____ 525 _____
Cost of goods sold 330 790 _____
Answer:
Company X:
Sales :
= Gross Profit + Cost of goods sold
= 245 + 330
= $575
Operating expenses:
= Gross profit - Net income
= 245 - 30
= $215
Company Y
Gross profit:
= Sales - Cost of goods sold
= 1,270 - 790
= $480
Net income:
= Gross profit - Operating expenses
= 480 - 525
= $(45)
Company Z
Operating expenses :
= Gross profit - Net income
= 525 - (-20)
= 525 + 20
= $545
Cost of goods sold:
= Sales - Gross profit
= 970 - 525
= $445
Xlon Co budgets a seling price of $ 86 per unit , varlable costs of $ 34 per unit , and total fixed costs of $ 286,000 . During June , the company produced and sold 12,400 units and incurred actual variable costs of $ 367,000 and actual fixed costs of $ 301,000 . Actual sales for June were $ 1,100,000 . Prepare a flexible budget report showing variances between budgeted and actual results . List variable and fixed expenses separately . ( Indicate the effect of each variance by selecting for favorable , unfavorable , and no variance )
Answer and Explanation:
The preparation of the flexible budget report is presented below;
Particulars Flexible budget Actual sales Variance fav or unfav
Sales $1,066,400 $1,100,000 $33,600 favorable
Less:
Variable expense $421,600 $367,000 $54,600 favorable
Contribution margin $644,800 $733,000 $88,200 favorable
Less:
Fixed expense $286,000 $301,000 $15,000 unfavorable
Net operating income $358,800 $432,000 $73,200 favorable
A pre-determined overhead rate includes:_____.
a. estimated total manufacturing overhead cost in the numerator.
b. only the fixed portion of the estimated manufacturing overhead cost in the numerator.
c. only the variable portion of the estimated manufacturing overhead cost in the numerator.
d. estimated total manufacturing overhead cost in the denominator.
Answer:
a. estimated total manufacturing overhead cost in the numerator.
Explanation:
The formula to compute the pre-determined overhead rate is shown below;
As we know that
Pre-determined overhead rate is
= Estimated total manufacturing overhead cost ÷ estimated activity level
Here estimated activity level can be estimated direct labor hours, estimated machine hours etc
Therefore the option a is correct
On August 4, Armstrong Trucking, Inc., paid $4,500 to replace the engine in one of its trucks.
Required:
Write the necessary journal entry.
Answer and Explanation:
The journal entry is shown below:
Truck A/c Dr $4,500
To Cash A/c $4,500
(Being the truck is replaced for cash)
Here the truck is debited as it increased the assets and credited the cash as it decreased the assets
Use the following abbreviations to indicate the journal in which you would record transactions a through n.
a. Cash purchase of merchandise inventory
b. Collection of dividend revenue earned on an investment
c. Prepayment of insurance
d. Borrowing money on a long-term note payable
e. Purchase of equipment on account
f. Cost of goods sold along with a credit sale
g. Cash sale of merchandise inventory
h. Payment of rent
i. Depreciation of computer equipment
j. Purchase of merchandise inventory on account
k. Collection of accounts receivable
l. Expiration of prepaid insurance
m. Sale on account
n. Payment on account
Answer:
Transactions Appropriate Journal
a. Cash Payment Journal
b. Cash Receipt Journal
c. Cash Payment Journal
d. Cash Receipt Journal
e. General Journal
f. General Journal
g. Cash Receipt Journal
h. Cash Payment Journal
i. Adjusting Journal
j. Purchases Journal
k. Cash Receipt Journal
l. Adjusting Journal
m. Sales Journal
n. Cash Payment Journal
Explanation:
Journals are used to record transactions as they occur on a daily basis. They are the first records made of transactions. Journals indicate the accounts involved in each transaction. They indicate the accounts to be debited and the accounts to be credited in accordance with the double entry system of accounting.
Currently, the income statement for company Grace reflects a total period cost for depreciation of $7,876,000. Grace is planning for an increase in this depreciation next year. On the financial statements of Grace this will . . .
Answer:
Currently, the income statement for company Grace reflects a total period cost for depreciation of $7,876,000
A machine having a first cost of $20,000 is expected to save $1500 in thefirst year of operation, and the savings should increase by $200 every year until (and including) the ninth year, thereafter the savings will decrease by $150 until (and including) the 16th year.
Using equivalent uniform annual worth, is this machine economical? Assume a MARR of 9%.
Answer:
This machine is not economical. A further explanation is provided below.
Explanation:
Given:
First cost,
= $20,000
Saving,
= $1500
Increase by,
= $200
Decrease by,
= $150
Now,
The EUAW will be:
= [tex]-20000+1500(\frac{P}{F}, 9 \ percent,1 )+1700(\frac{P}{F}, 9 \ percent,8 )+1550(\frac{P}{F}, 9 \ percent,7 )[/tex]
= [tex]-20000+1500\times 0.9174+1700\times 0.5018+1550\times 0.5470[/tex]
= [tex]-20,000 + 1,371.1 + 856.06 + 847.85[/tex]
= [tex]-16,294.99[/tex] ($) negative
Thus this machine is not economical.
Assume that Commonwealth Edison Company deposited $250 million in an escrow account with Northern Trust Company at the beginning of 2017 as a commitment toward a power plant to be completed December 31, 2020. How much will the company have on deposit at the end of 4 years if interest is 10%, compounded semiannually
Answer: $369,365,000
Explanation:
Ti calculate the future value if the company goes thus:
Amount deposited = $250 million
Annual interest rate = 10%
Semiannual interest rate = 5%
Semiannual Period = 4 years =4×2 = 8
Future Value will then be:
= $250 million × FV of $1 (5%, 8)
= $250 million × 1.47746
= $369,365,000
All of the following are true of IT policy frameworks, except: A. an IT policy framework includes policies, standards, baselines, procedures, guidelines, and a taxonomy. B. the framework must define the business as usual (BAU) activities and accountabilities needed to ensure information security policies are maintained. C. an IT policy framework should be fully accessible by executives and managers, with relevant highlights shared with general employees. D. you can measure success by how well the framework helps reduce risk to the organization.
Answer:
D. you can measure success by how well the framework helps reduce risk to the organization.
Explanation:
The IT policy measures includes
1. The policies, standard, etc
2. It is the framework that works with the bau activities in order to ensure the policies related to the information security that should be maintained
3. It could be fully accessible by the executives having a relevant highlights that shared with the general employees
SO, the option d is considered
differentiate between the short run and Long run?
Answer:
Short-run is a time limit during which at least one input can be fixed and other input quantities can be verified.
The long run is a time period in which all the inputs can be verified in quantities.
Explanation:
Both the fixed and variable costs occur in the short term.There are no fixed costs in the long term.The combination of the output of a company results in the desired amount of the goods at the lowest possible cost is sustained by efficient long-term costs.The output changes variable costs. For instance, the employee's salaries and raw material costs are variable costs.Based on variable costs and the production rate, the short-run costs are increasing or falling. If a company manages its short-term costs well over time, the desired long-term costs and goals will more likely be achieved.Suppose the U.S. yield curve is flat at 3% and the euro yield curve is flat at 5%. The current exchange rate is $1.4 per euro. What will be the swap rate on an agreement to exchange currency over a 3-year period
Answer: hello your question is incomplete attached below is the complete question.
answer :
3.02 million, 2.96 million, 2.91 million
Explanation:
Determine the swap rate over a 3-year period
swap rate = forward exchange rate * exchange amount
For year 1
1.4 * ( 1 + 0.03 / 1 + 0.05 ) * 2.2 million
= 1.4 ( 0.98095 ) * 2.2
= 3.02 million
For year 2
1.4 * ( 1 + 0.03 / 1 + 0.05 )^2 * 2..2 million
= 1.4 ( 0.98095 )^2 * 2.2 million
= 2.96378 million
For year 3
1.4 * ( 1 + 0.03 / 1 + 0.05 )^3 * 2.2 million
= 1.4 ( 0.98095 )^3 * 2.2 million
= 2.90733 million
To estimate the average time taken to complete the Stat 121 final exam, instructors randomly selected 150 students that had previously taken the course and recorded their time on the test. The instructors then calculated a 98% confidence interval to be (98, 142) minutes. What is the parameter the instructors are trying to estimate?
Answer:
The population mean
Explanation:
The confidence interval gives the probability that a certain population parametwr falls in between a pair values based on the given sample mean and a stated confidence level.
The confidence interval ; (98, 142) gives the pair of interval in which the population mean time taken in stat 121 finals at 98% level of confidence.
Hence, we can be 98% confident that the the population parameter would fall within 98 and 142.
A company is evaluating a new 4-year project. The equipment necessary for the project will cost $3,500,000 and can be sold for $715,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 34 percent. What is the aftertax salvage value of the equipment?
Hint: 1. Find the remaining book value at the end. 2. Subtract this from the expected sale price to find the gain on sale. 3. Apply the tax rate to this gain to find the taxes owed. 4. The after-tax salvage value is the sale price minus the taxes.
a) $715,000.
b) $752,468.
c) $540,444.
d) $677,532.
e) $471,900.
Answer:
d) $677,532.
Explanation:
1.
Written down value of the equipment after 4 years = Cost x ( 100% - 1st year MACRS - Second-year MACRS - Third-year MACRS - Fourth-year MACRS ) = $3,500,000 x ( 100% - 20% - 32% - 19.20% - 11.52% ) = $604,800
2.
Now calculate the gain on the sale of equipment
Gain on the sale of equipment = Sale Price - Written down Value after 4 years = $715,000 - $604,800 = $110,200
3.
Tax owed = Gain on the sale x Tax rate = $110,200 x 34% = $37,468
After-tax salvage value = Sales price - Tax = $715,000 - $37,468 = $677,532
Rotweiler Obedience School’s December 31, 2009, balance sheet showed net fixed assets of $1,271,006, and the December 31, 2010, balance sheet showed net fixed assets of $2,108,650. The company’s 2010 income statement showed a depreciation expense of $171,813. What was Rotweiler’s net capital spending for 2010?
Answer:
The answer is "[tex]\$1,009,457[/tex]".
Explanation:
The net fixed asset starting value [tex]= \$1,271,006[/tex]
The net fixed asset ending value[tex]= \$2,108,650[/tex]
The expense of the depreciation [tex]= \$171,813[/tex]
[tex]\text{Net Capital Spending = The net fixed asset ending value} - \text{The net fixed asset starting value} + \text{The expense of the depreciation} \\\\[/tex]
[tex]= \$2,108,650 - \$1,271,006 + \$171,813\\\\= \$1,009,457[/tex]
Royal Inc. issued 10-year, $100,000, 10% annual interest-bearing bonds with a carrying value of $88,800 as of December 31, 2020. Royal Inc. amortizes the discount using the effective interest method. At the time the bonds were issued on June 30, 2020, Royal Inc. elected to account for the bonds using the fair value option. In prepar-ing financial statements for 2020, Royal Inc. will need to make an adjusting entry to reflect the change in the fair value of the bonds.Required:a. Assume that the fair value of the $100,000 bonds is $80,000 on December 31, 2020. The decrease in fair value is due to general interest rate changes. Record the adjusting entry on December 31, 2020. b. Assume instead that the fair value of the $100,000 bonds is $95,000 on December 31, 2020. The increase in the fair value of the bonds is due entirely to a change in the credit risk of the debt.
Answer:
Royal Inc.
Journal Entries:
a. Assumed fair value on December 31, 2020 = $80,000
Debit Bonds Payable $8,800
Credit Fair Value Adjustment - Bonds Payable $8,800
To record the fair value adjustment in the carrying value of the bonds.
b. Assumed fair value on December 31, 2020 = $95,000
Debit Fair Value Adjustment - Bonds Payable $6,200
Credit Bonds Payable $6,200
To record the fair value adjustment in the carrying value of the bonds.
Explanation:
a) Data and Calculations:
Face value of bonds issued = $100,000
Carrying value as of December 31, 2020 = $88,800
Coupon interest rate = 10%
Maturity period = 10 years
a. Assumed fair value on December 31, 2020 = $80,000
Bonds Payable $8,800 Fair Value Adjustment - Bonds Payable $8,800
b. Assumed fair value on December 31, 2020 = $95,000
Fair Value Adjustment - Bonds Payable $6,200 Bonds Payable $6,200
The collective strength of the five forces can help determine
a. what specific strategy each industry participant should pursue.
b. the strengths and weaknesses of each company in the industry.
c. if companies in the industry can reasonably expect to earn decent profits.
d. a broad view of the industry's macro-environment.
Answer:
c. if companies in the industry can reasonably expect to earn decent profits.
Explanation:
The Porter’s five forces of competition is a framework developed by Michael E. Porter in 1979, it is used to measure and analyze an organization's competitiveness in a business environment.
The Porter's five forces of competition framework are:
1. The bargaining power of suppliers.
2. The bargaining power of customers.
3. Threat posed by substitute products.
4. Threats posed by new entrants.
5. Threats posed by existing rivals in the industry.
A competitive force can be defined as all of the variables and factors that are capable of threatening the profitability, continuous growth and development of a business firm. Also, the competitive forces differs from one industry to another and as such they are never the same.
Hence, the collective strength of the five forces can help determine if companies in the industry can reasonably expect to earn decent profits.
Compute the value of price elasticity of supply. If the percentage in quantity supply is 75% and percentage change in price is 55%.
Answer:
Price elasticity of supply = 1.36%
Explanation:
Given the following data;
percentage in quantity supply = 75%
percentage change in price = 55%.
To find the the value of price elasticity of supply;
A price elasticity of supply (PES) can be defined as a measure of the responsiveness of the quantity of a product supplied with respect to a change in price of the product, all things being equal.
Mathematically, the price elasticity of supply is given by the formula;
[tex] Price \; elasticity \; of \; supply = \frac {Percentage \; change \; in \; supply}{Percentage \; change \; in \; price} [/tex]
Substituting into the formula, we have;
[tex] Price \; elasticity \; of \; supply = \frac {75}{55} [/tex]
Price elasticity of supply = 1.36%
Therefore, the degree of elasticity is said to be elastic because the price elasticity of supply (PES) is greater than 1.
Blue Inc. uses LIFO inventory costing. At January 1, 2020, inventory was $217,208 at both cost and market value. At December 31, 2020, the inventory was $287,675 at cost and $261,060 at market value. Use an allowance account. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method.
Answer:
A. Dr Cost of Goods Sold $26,615
Cr Allowance to Reduce Inventory to Market $26,615
B.Dr Loss Due to Market Decline of Inventory $26,615
Cr Allowance to Reduce Inventory to Market $26,615
Explanation:
(a) Preparation of the necessary December 31 entry under the cost-of-goods-sold method
COST-OF-GOODS-SOLD METHOD
Dr Cost of Goods Sold $26,615
Cr Allowance to Reduce Inventory to Market $26,615
($287,675 - $261,060)
(b) Preparation of the necessary December 31 entry under Loss method
LOSS METHOD
Dr Loss Due to Market Decline of Inventory $26,615
Cr Allowance to Reduce Inventory to Market $26,615
($287,675 - $261,060)
Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,000 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,000 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $600 + $0.35 per mile.
Answer:
1. 1,500 miles
2. Profit
3.4,000 miles
Explanation:
1. Calculation to Determine how many miles Russell needs to drive to break even k-Even Miles
First step is to calculate the Unit contribution margin
Using this formula
Let plug in the formula
Unit contribution margin = Sales price – Variable cost per unit
Unit contribution margin= $0.75 per mile – $0.35 per mile
Unit contribution margin= $0.40 per mile
Now let determine the Break-even units using this formula
Break-even units = Total fixed cost / Unit contribution margin
Let plug in the formula
Break-even units= $600 / $0.40
Break-even units= 1,500 miles
Therefore how many miles Russell needs to drive to break even k-Even Miles will be 1,500 miles
2. Calculation to determine whether he earned a profit or a loss last month Assume Russell drove 1,800 miles last month
Profit=1,800 miles – 1,500 miles
Profit=300 miles
Therefore Assume Russell drove 1,800 miles last month he will EARNED A PROFIT last month
3. Calculation to determine how many miles Russell must drive to earn $1,000 in profit.
Using this formula
Target units = (Fixed cost + Target Profit) / Unit contribution margin
Let plug in the formula
Target units = ($600 + $1,000) / $0.40
Target units = 4,000 miles
Therefore how many miles Russell must drive to earn $1,000 in profit will be 4,000 miles