If the price of movies is $5, C. Chan will consume 6 pizza pies, 3 compact disks, and 3 movies.
How to explain the utilityPizza pies: Marginal Utility per Dollar = Marginal Utility / Price = 30 / 15 = 2
Compact disks: Marginal Utility per Dollar = Marginal Utility / Price = 20 / 15 ≈ 1.33
Movies: Marginal Utility per Dollar = Marginal Utility / Price = 6 / 7.50 = 0.8
In order to maximize utility with a limited budget, C. Chan should allocate his income to the goods with the highest marginal utility per dollar. In this case, it would be pizza pies
If the price of movies is $10, C. Chan will consume 4 pizza pies, 2 compact disks, and 1 movie. This is because the marginal utility of movies is now less than the price of movies. C. Chan will therefore buy fewer movies and more of the other goods.
If the price of movies is $5, C. Chan will consume 6 pizza pies, 3 compact disks, and 3 movies. This is because the marginal utility of movies is now greater than the price of movies. C. Chan will therefore buy more movies and fewer of the other goods.
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A company estimates that warranty expense will be 5% of sales. The company has sales of $225,000 for the current period. The current period's entry to record the warranty expense is: OA. Warranty Expe
To record the warranty expense, the company should debit the Warranty Expense account for [tex]\$11,250[/tex] and credit the Estimated Warranty Payable account for the same amount.
The current period's entry to record the warranty expense is to debit the Warranty Expense account for [tex]\$11,250[/tex] and credit the Estimated Warranty Payable account for the same amount. This entry reflects the company's estimation that warranty expense will amount to [tex]5\%[/tex] of sales, which in this case is [tex]\$11,250[/tex] based on sales of [tex]\$225,000[/tex]. By recording this entry, the company recognizes the estimated liability for potential warranty claims and the corresponding expense. This helps ensure accurate financial reporting and reflects the company's commitment to addressing warranty obligations. The entry will be made at the end of the current period in the company's books.The journal entry to record the warranty expense for the current period is: Debit Warranty Expense $11,250 and Credit Estimated Warranty Payable [tex]\$11,250[/tex].
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Suppose that the demand curve for electric cars is Q(P) = 100 - 4P. 1. Suppose that Tesla is the only producer of electric cars in the market. They face a total cost function TC(Q) = 5Q, where Q represents the number of units produced. a. What is the market quantity that Tesla produces to maximize its profits? b. What is the associated market price?
The market quantity that Tesla produces to maximize its profits is approximately 52.5 units. The associated market price is approximately $11.875 per unit.
In this case, we have:
Demand function: Q(P) = 100 - 4P
Total cost function: TC(Q) = 5Q
a. To find the market quantity, we need to equate MC and MR:
MC = MR
Marginal Cost (MC) is given by the derivative of the total cost function with respect to quantity (Q):
MC = dTC/dQ
Marginal Revenue (MR) is given by the derivative of the demand function with respect to quantity (Q):
MR = dQ(P)/dQ
Let's calculate MC and MR:
MC = dTC/dQ = 5
MR = dQ(P)/dQ = 100 - 8P
To find the quantity where MC equals MR, we set the two equations equal to each other and solve for Q:
5 = 100 - 8P
8P = 100 - 5
8P = 95
P = 95/8
P = 11.875
Substituting P back into the demand function to find Q:
Q = 100 - 4P
Q = 100 - 4(11.875)
Q = 100 - 47.5
Q = 52.5
Therefore, the market quantity that Tesla produces = 52.5 units.
b. To find the associated market price, we substitute the quantity (Q) back into the demand function:
P = (100 - Q)/4
P = (100 - 52.5)/4
P = 47.5/4
P = 11.875
Therefore, the associated market price = $11.875 per unit.
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The cash register tape for Waterway Industries reported sales of $27,192.00. Record the journal entry that would be necessary for each of the following situations. (a) Sales per cash register tape exceeds cash on hand by $54.50. (b) Cash on hand exceeds cash reported by cash register tape by $33.00. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 52.75.)
The journal entry of the given transactions would include (a) Dr. Accounts Receivable $27,192.00 and Cr. Sales $27,192.00 and (b) Dr. Cash $27,159.50 and Cr. Sales $27,126.50.
The cash register tape for Waterway Industries reported sales of $27,192.00.
Record the journal entry that would be necessary for each of the following situations.
(a) Sales per cash register tape exceed cash on hand by $54.50.
Debit Credit
Accounts Receivable $27,192.00
Sales $27,192.00
Since the sales per cash register tape exceeds cash on hand by $54.50, the company needs to record the sales in their journal entry as Accounts Receivable $27,192.00 and Sales $27,192.00.
(b) Cash on hand exceeds cash reported by cash register tape by $33.00.
Debit Credit
Cash $27,159.50
Sales $27,126.50
If cash on hand exceeds cash reported by cash register tape by $33.00, the company has to record the cash on hand as Debit to Cash $27,159.50 and Sales $27,126.50 as Credit.
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Fill in the blanks in the following table, where Q is units of output, FC is fixed cost, VC is variable cost, TC is total cost, MC is marginal cost, AFC is average fixed cost, AVC is average variable
The following is the filled table, where Q is units of output, FC is fixed cost, VC is variable cost, TC is total cost, MC is marginal cost, AFC is average fixed cost, AVC is average variable cost. Output (Q) Fixed Cost (FC) Variable Cost (VC) Total Cost (TC) Marginal Cost (MC) Average Fixed Cost (AFC) Average Variable Cost (AVC) 0 $ 600 $ 0 $ 600 - - - 1 600 200 800 200 600 200 2 600 350 950 150 300 475 3 600 450 1050 100 200 350 4 600 550 1150 100 150 287.5 5 600 700 1300 150 120 260 6 600 900 1500 200 100 250 7 600 1200 1800 300 85.7 257.14 8 600 1700 2300 500 100 287.5 9 600 2700 3300 1000 200 366.67 10 600 4200 4800 1500 300 480AFC = FC/Q, AVC = VC/Q, TC = FC + VC.QTherefore,FC/Q = AFC, VC/Q = AVC, TC/Q = AC.Let's define each of the terms used in the table;Output (Q) - This is the units of productionFixed Cost (FC) - These are the costs that do not vary with the level of outputVariable Cost (VC) - These are the costs that vary with the level of outputTotal Cost (TC) - These are the total costs incurred to produce a specific output levelMarginal Cost (MC) - This is the change in total cost resulting from an additional unit of production.Average Fixed Cost (AFC) - This is the fixed cost per unit of productionAverage Variable Cost (AVC) - This is the variable cost per unit of productionTherefore, the above table is the filled form of the cost schedule or table where all the terms of the cost analysis are defined and analyzed.
A corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000 The entry to record this transaction would include A. A debit to Land for $60,000. B. A credit to paid (Contributed) Capital in Excess of Par Value, Common Stock for $24.000 C. A debit to Common Stock for $60,000 D, A credit to Land for $60,000
The entry to record the transaction where a corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000 would include:
A. A debit to Land for $60,000.
C. A debit to Common Stock for $60,000.
The correct answer is a combination of options A and C.
When a corporation issues stock in exchange for non-cash assets, such as land, the general principle is to record the transaction at the fair market value of the assets received. In this case, the market value of the land is $84,000. To properly record the transaction, the following entries would be made: Debit Land for $60,000: This recognizes the fair market value of the land received. The difference between the fair market value ($84,000) and the par value of the stock ($10 x 6,000 shares = $60,000) represents the contributed capital in excess of par value. Debit Common Stock for $60,000: This entry records the par value of the shares issued, which is $10 per share multiplied by the number of shares issued (6,000 shares). The answer options B and D are incorrect because they do not accurately reflect the accounting treatment required in this scenario. Option B suggests crediting Contributed Capital in Excess of Par Value, but this account is not applicable in this specific transaction. Option D suggests crediting Land for $60,000, but this amount does not represent the fair market value of the land received. Therefore, the correct answer is A. A debit to Land for $60,000 and C. A debit to Common Stock for $60,000.
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a physician has written a study plan to test whether an approved drug can prevent headaches. the physician has sent this plan to the pharmaceutical company that makes the drug, and the company has agreed to provide the drug at no cost for the study. this is an example of:
We can see here that this is an example of: clinical trial.
What is a study plan?A study plan is a structured schedule or outline that individuals create to guide their learning and academic activities. It serves as a roadmap for organizing and managing one's time, resources, and efforts in order to achieve specific learning goals and academic success.
A clinical trial is a research study that tests the safety and effectiveness of a medical intervention in humans. In this case, the medical intervention is the drug that the physician wants to test for its ability to prevent headaches.
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The physician has devised a study plan, outlining the methodology and objectives of the research.
By reaching out to the pharmaceutical company that manufactures the drug, the physician has successfully obtained their agreement to provide the medication free of charge for the study. This demonstrates a cooperative effort between the medical community and the industry to conduct scientific investigations and gather valuable data on the drug's potential in headache prevention. The arrangement signifies a mutually beneficial relationship, as the pharmaceutical company benefits from the scientific inquiry into their product, while the physician gains access to the necessary resources to conduct the study.For such more questions on methodology
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Which of the following statements is true? A. As the degree of specialization and interdependence has increased over the years, dependency on government services has declined. B. Decreased specialization leads to increased reliance on others. C. Increased specialization leads to decreased interdependence. D. Increased specialization leads to increased interdependence. E. The degree of specialization in the U.S. has decreased over the years. F. I'm not sure A. B. C. D. E.
The correct answer is D. Increased specialization leads to increased interdependence.
Specialization refers to the process of individuals, firms, or countries focusing on producing specific goods or services in which they have a comparative advantage. As specialization increases, individuals and entities become more specialized in their respective areas, leading to greater expertise and efficiency in production.
This increased specialization fosters interdependence among various parties. As each specialized entity focuses on producing a specific product or service, they rely on other specialized entities to provide goods or services that they do not produce themselves. This interdependence is driven by the need for trade and exchange of specialized products, creating a network of interconnected economic relationships.
Therefore, as specialization increases, so does interdependence, as entities rely on each other's specialized contributions to meet their diverse needs and create a more efficient economy.
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What is the value today of a money machine that will pay
$4,431.00 every six months for 15.00 years? Assume the first
payment is made 5.00 years from today and the interest rate is
5.00%?
The value today of a money machine that will pay $4,431 every six months for 15 years at an interest rate of 5% is $89,536.67.
The value today of a money machine that will pay $4,431 every six months for 15 years at an interest rate of 5% can be calculated by using the formula of the present value of an annuity. An annuity is a series of payments made at equal intervals of time. It is either a series of payments received by an individual or a series of payments paid by an individual.
The value of an annuity can be determined by calculating the present value of that annuity. Present value of an annuity: PV = A/i [1 - 1/(1+i)^n]Where, PV = Present value of an annuity = Annuity payments, I = Interest rate n = Number of payments. The first payment will be received after 5 years. Since the payment is made every 6 months, the number of payments will be 30 (15 years x 2 payments per year).
Therefore, n = 30 and i = 2.5% (5% ÷ 2). A = $4,431PV = 4431/0.025 [1 - 1/ (1.025)^30]PV = $89,536.67Hence, the value today of a money machine that will pay $4,431 every six months for 15 years at an interest rate of 5% is $89,536.67.
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Which of the following is an example of a cash inflow from an operating activity?
a. Collection of an account receivable from a credit sale.
b. Collection of cash relating to a note receivable.
c. Sale of property, plant, and equipment.
d. None of the above.
Collection of an account receivable from a credit sale is an example of a cash inflow from an operating activity. Option A is the correct answer.
For every company organization, cash is the most valuable and liquid asset. Businesses reveal the closing amount of cash on their balance sheet for an accounting period, and good cash management may help an organization succeed. Option A is the correct answer.
The amount of money owed to a business for products or services provided or utilized but not yet paid for by clients is known as accounts receivable (AR). Due to the fact that receiving cash results from the sale of the company's products, which is an operating activity for any company, the collection of accounts receivables will have an impact on the organization's cash flow from operating activities and increase its cash balance.
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Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $249.95 and its unit product cost is $164.00, as shown below: Direct materials Direct labour Manufacturing overhead Unit product cost $ 93.00 56.00 15.00 $164.00 Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period. However, $7 of the overhead is variable, depending on the number of trophies produced. The customer would like a special logo applied to the trophies requiring additional materials costing $6 per trophy and would also require acquisition of a special tool costing $195 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order. Required: a. What effect would accepting this order have on the company's operating income if a special price of $199.95 is offered per trophy for this order? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net operating income increased by
Accepting the special order at the offered price of $199.95 per trophy would increase the company's operating income by $229.50.
Answer to the questionsSelling price per trophy for the special order: $199.95
Unit product cost of the trophy: $164.00
Additional materials cost per trophy: $6.00
Additional fixed manufacturing overhead cost per trophy: $0.00
Additional variable manufacturing overhead cost per trophy: $7.00
Additional cost for the special tool: $195.00
Contribution margin per trophy = Selling price per trophy - Unit product cost per trophy
Contribution margin per trophy = $199.95 - $164.00 = $35.95
Incremental contribution margin for the special order = Contribution margin per trophy - Additional materials cost per trophy - Additional variable manufacturing overhead cost per trophy
Incremental contribution margin for the special order = $35.95 - $6.00 - $7.00 = $22.95
Now, we can calculate the effect on the company's operating income:
Effect on operating income = Incremental contribution margin per trophy * Number of trophies in the special order
Effect on operating income = $22.95 * 10 = $229.50
Therefore, accepting the special order at the offered price of $199.95 per trophy would increase the company's operating income by $229.50.
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Arabian Gulf Corporation reports the following stockholders' equity section on December 31, 2020. - Common stock; $10 par value; 500,000 shares authorized; 200,000 shares issued and outstanding.. .$ 2,000,000 - Paid in capital in excess of par value, common stock -Retained earnings.. ..400,000 900,000 $3,300,000 Total The Corporation completed the following transactions in 2021. 1- Jan. 10, Directors declared a $1 per share cash dividend payable on March 15 to the Jan. 31 stockholders of record. 2- Mar. 01, Purchased 10,000 shares of its own common for $15 per share. 3- Mar. 15, Paid the cash dividend declared on Jan. 10. 4- May 01, Sold 6,000 of its treasury shares at $15 cash per share. 5-Sep. 30, Directors declared a 30% stock dividend when the share market price is $16. 6- Nov. 01, Distributed stock dividends declared on Sep. 30. 7- Nov. 15. The company implemented 5-for-1 stock split for the common stock. Required; Prepare journal entries to record each of these transactions for 2021. CLEARLY INDICATE THE DEBITS & CREDITS Example: XYZ Company pays $10,000 cash to purchase land Answer: Dr. Land 10,000 Cr. Cash 10,000 For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)
Journal entries to record each of these transactions for 2021 are:Jan. 10:Declaration of cash dividends payable on March 15 to the Jan. 31 stockholders of record means that: Total amount of dividend = $1 × 200,000 = $200,000 Dividend payable account Dr. $200,000 Dividend payable account Cr. $200,000
Mar. 01: Purchase of 10,000 shares of its own common for $15 per share: Treasury stock account Dr. $150,000 Cash account Cr. $150,000 Mar. 15: Payment of cash dividends: Dividend payable account Dr. $200,000 Cash account Cr. $200,000 May 01: Sale of 6,000 treasury shares at $15 cash per share: Cash account Dr. $90,000 Treasury stock account Cr. $90,000
Sep. 30: Declaration of 30% stock dividends: Total number of new shares = 30% of 200,000 = 60,000 Total amount to be transferred from retained earnings = Market price × 60,000 = $16 × 60,000 = $960,000 Retained earnings account Dr. $960,000 Common stock dividend distributable Cr. $240,000 ([$16 par value × 60,000 shares] /
Oct. 31: After adjusting the retained earnings balance, the Common Stock Dividend Distributable account reflects the shares to be distributed: Common stock dividend distributable account Dr. $240,000 Common stock account Cr. $240,000
Nov. 01: Implementation of 5-for-1 stock split: Common stock account Dr. $2,000,000 ([$10 par value × 200,000 shares] × 5) Additional paid-in capital account Cr. $2,000,000 ([$10 par value × 200,000 shares] × 4) Hope this helps!
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3: purchased merchandise inventory on account from wholesalers, . terms /15, n/eom, fob shipping point.
The deal entailed buying stock of goods from wholesalers with terms of "net 15, end of month" (n/eom) and "free on board (FOB) shipping point."
"Net 15" refers to a deadline of 15 days for making payment on purchased items. If the purchase is made within a month, the phrase "end of month" indicates that the payment is due at the end of that month. The FOB shipping point denotes that once the items are transported, ownership and responsibility for them pass to the buyer. Net 15: "Net 15" is a payment term used in business transactions that specifies the number of days a buyer has to make payment for purchased goods or services. In this case, it means the payment is due within 15 days from the date of the purchase.End of month: "End of month" is another payment term used to indicate the due date for payment. If a purchase is made within a month and the payment is required "end of month," it means the payment is due on the last day of that month
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Consider a 20-year (T) lease providing for annual payments at the end of the years. The initial rent is $30/SF (CF), but that rent will grow at a rate of 2.5% per year (g) each year thereafter. What is the PV of the lease, per SF, assuming an opportunity cost of capital of 8% (r) per year?
The present value (PV) of the lease, per square foot (SF), is $25.47.
To calculate the present value (PV) of the lease, we need to determine the annual cash flows and discount them to their present value using the opportunity cost of capital rate. The lease provides for annual payments at the end of each year for a period of 20 years. The initial rent is $30 per square foot (SF), and it will increase by 2.5% per year thereafter.
Step 1:
To calculate the PV, we can use the formula for the present value of an annuity:
PV = CF * [1 - (1 + g)^(-T)] / (r - g)
where PV is the present value, CF is the cash flow in the first year, T is the number of years, r is the opportunity cost of capital rate, and g is the growth rate.
Step 2:
In this case, CF is $30/SF, T is 20 years, r is 8% per year, and g is 2.5% per year. Plugging these values into the formula, we get:
PV = $30 * [1 - (1 + 0.025)^(-20)] / (0.08 - 0.025)
≈ $30 * [1 - (1.025)^(-20)] / 0.055
≈ $30 * [1 - 0.5605] / 0.055
≈ $30 * 0.4395 / 0.055
≈ $13.185 / 0.055
≈ $239.727
To express the PV per SF, we divide the PV by the SF:
PV per SF = $239.727 / 9.4
≈ $25.47
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1. what are taxonomic categories and how do consumers use them to structure knowledge in memory
2. what is a schema? identify strategies that marketers can use in order to increase :
- favorability
- uniqueness
- salience
1. Taxonomic categories are divisions or classifications of things based on their characteristics. These categories help consumers structure knowledge in memory by providing a mental framework for organizing and remembering information.
2. A schema is a mental framework or blueprint that helps individuals organize and interpret information.Marketers can use various strategies to increase the favorability, uniqueness, and salience of their product schemas
1. Taxonomic categories are divisions or classifications of things based on their characteristics. These categories help consumers structure knowledge in memory by providing a mental framework for organizing and remembering information. Consumers use taxonomic categories to compare and contrast products, identify patterns and relationships, and make decisions based on their needs and preferences. For example, a consumer might use taxonomic categories like "electronics" or "kitchen appliances" to group similar products together in their mind and recall information about them more easily.
2. A schema is a mental framework or blueprint that helps individuals organize and interpret information. Schemas are used to make sense of new experiences and information by comparing them to existing knowledge in memory.
Marketers can use various strategies to increase the favorability, uniqueness, and salience of their product schemas:
Favorability: Marketers can increase the favorability of a product schema by creating positive associations with the brand. This can be achieved through advertising, endorsements, or product placement, among other methods.
Uniqueness: Marketers can increase the uniqueness of a product schema by highlighting distinctive features or benefits that set it apart from competitors. This can be achieved through product design, packaging, or branding.
Salience: Marketers can increase the salience of a product schema by making it more memorable and easily accessible in memory. This can be achieved through repetition, visual cues, or other mnemonic devices.
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Which of the following statements best describe e-interruptions? OA. E-interruptions are caused by face to face conversations. O B. E-interruptions are caused by emails and texts. OC. E-interruptions
The best statement that describes e-interruptions is "E-interruptions are caused by emails and texts."
The correct Option is B.
E-interruptions can be defined as digital distractions that affect people's focus or concentration on a given task.
They can take many forms, including email, text messages, social media notifications, and pop-up ads. These interruptions can lead to a reduction in productivity and a decrease in the quality of work being done. Therefore, it is essential to learn how to manage e-interruptions effectively.In today's world, electronic communication channels have become more prevalent than ever. With the advent of smartphones and tablets, people are now connected to the internet around the clock. This constant connectivity has created a situation where e-interruptions have become a common occurrence. Whether it's an email notification or a social media update, these distractions can quickly disrupt our focus and make it challenging to stay on task.E-interruptions can have a significant impact on our productivity and well-being. They can lead to increased stress, reduced job satisfaction, and a decrease in the quality of work being done. To manage these interruptions effectively, it is essential to create a work environment that minimizes their impact. This may involve turning off notifications during specific periods, using productivity apps that block distractions, or setting clear boundaries around electronic communication channels. By managing e-interruptions effectively, you can improve your focus, productivity, and overall well-being.
The correct Option is B.
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GMAT Success From "Cost Accounting". Horngren, Foster & Datar Adapted by C. Mendoza Emma Frost is considering selling GMAT Success, a test prep book and software package for the business school admission test, at a college fair in Chicago. Emma knows she can purchase this package from a wholesaler at $120 per package, with the privilege of returning all unsold packages and receiving a full $120 refund per package. She also knows that she must pay $2 000 to the organizers for the stand rental at the fair. She will incur no other costs. She must decide whether she should rent the stand. Emma gathers information about the type of individuals likely to attend the fair and other test- prep packages that might be sold at the fair. She also gathers evidence on her past experiences selling GMAT Success at fairs very much like the Chicago fair. Using all the information available to her, Emma predicts that she can charge a price of $200 for GMAT Success. At that price, she is reasonably confident that she can sell at least 30 packages and possibly as many as 60. Question n° 1: What will be the operating profit if sales are 20 packages? 40 packages? Question n° 2: What will be the breakeven point in units? What will be breakeven revenues? What will be the safety margin if expected sales are 40 packages? Question n°3: How many packages must be sold to earn a target operating profit of $1,600? Emma is contemplating whether to reduce the selling price to $175. At this price, she thinks she will sell 50 units (instead of 40). At this quantity, the test-prep package wholesaler who supplies GMAT Success will sell the packages to Emma for $115 per unit instead of $120. Question n°4: Should Emma reduce the selling price?
The cost accounting will be calculated as follows:Operating profit = Revenue - CostsTotal cost of Emma = $2000 (stand rental) + $120x (cost of 1 package) = $2000 + $120x; Where x is the number of units sold
1: If the sales are 20 packages, then the operating profit will be:Operating profit = Revenue - CostsRevenue = Selling price × Units soldRevenue = $200 × 20 = $4000Operating profit = $4000 - $2000 - $120(20) = $1600If the sales are 40 packages, then the operating profit will be:Revenue = $200 × 40 = $8000Operating profit = $8000 - $2000 - $120(40) = $4002:Breakeven point: To find the breakeven point in units, we will equate total cost to the total revenue.
Total revenue = Total cost$200x = $2000 + $120x$80x = $2000x = 25. Therefore, Emma will have to sell 25 units to reach the breakeven point.
In dollar terms, breakeven revenues = Selling price × Number of units sold = $200 × 25 = $5000The safety margin:Expected sales = 40 packages.Therefore, the safety margin will be (Expected sales - Breakeven point) / Expected sales× 100%=(40 - 25) / 40 × 100%= 37.5%3:To earn the target operating profit of $1,600:Operating profit = Revenue - Costs $1600 = ($200x) - [$2000 + ($120x)]$1600 + $2000 = $200x - $120x$3600 = $80xX = $3600 / $80 = 45.Therefore, Emma needs to sell 45 units to earn the target operating profit of $1,600.
4:If Emma reduces the selling price to $175 and she can sell 50 units, then the operating profit will be:
Operating profit = Revenue - Costs Revenue = Selling price × Units sold = $175 × 50 = $8750 Total cost of Emma = $2000 (stand rental) + $115x (cost of 1 package) = $2000 + $115x If 50 units are sold, then x = 50O perating profit = $8750 - $2000 - $115(50) = $1750Thus, Emma should not reduce the selling price because the operating profit would decrease from $4,000 to $1,750.
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The Cupcakery is a chain of bakeries in the mid-Atlantic region of the US dust operates wing on a calendar year hos Assane the net profit (low) for the Cupcakery in 2020 before incorporating my deprecation deduction is $34.000 of a profit to addon the only tangible personal property the company still owns in 2020 is a large amount of expponent that had purchased on May 5, 2013 for $390,000, which has been used each year to make is cupcakes. In the your in which it acquired the epopeant, de Capcalary opted not to ale any Sec. 179 on the equipment and no other tangible personal was purchased throughout 2018 However, the company dad apply hom depreciation to the expugnent in 2018. Assume the bonus deprecation%lowed in 2011 for this property was 5% (feat from be% allowed in 2020)
What is the net profit (loss) for 2020 per chuding the relevant total deprecation deduction for year 2020
Use the appre depreciation table from your note sheet textbook where necessary.
The net profit (loss) for 2020, including the relevant total depreciation deduction, is -$21,701.
To calculate the net profit (loss) for 2020 including the relevant total depreciation deduction, we need to consider the depreciation expenses for the equipment and subtract them from the net profit before incorporating depreciation.
Given information:
Net profit (loss) before incorporating depreciation deduction in 2020: $34,000
Equipment purchase date: May 5, 2013
Equipment purchase cost: $390,000
Bonus depreciation rate in 2011: 5%
To calculate the depreciation expense for the equipment in 2020, we need to determine the depreciable base and apply the appropriate depreciation rate.
Depreciable Base:
The depreciable base is the purchase cost minus any depreciation deductions taken in previous years. Since the Cupcakery opted not to take any Section 179 or other depreciation deductions in 2018, the depreciable base for 2020 is still $390,000.
Depreciation Expense:
Bonus depreciation was allowed at a rate of 5% for the equipment acquired in 2013. Since the bonus depreciation rate has changed over the years, we need to use the appropriate depreciation table provided in your note sheet or textbook to calculate the depreciation expense.
Assuming the depreciation table shows a 7-year recovery period for the equipment, the annual depreciation rate for year 2020 would be 14.29% (100% divided by 7 years).
Depreciation Expense for 2020:
Depreciation Expense = Depreciable Base * Depreciation Rate
Depreciation Expense = $390,000 * 14.29% = $55,701
Net Profit (Loss) for 2020 including Depreciation Deduction:
Net Profit (Loss) = Net Profit before incorporating depreciation - Depreciation Expense
Net Profit (Loss) = $34,000 - $55,701 = -$21,701
Therefore, the net profit (loss) for 2020, including the relevant total depreciation deduction, is -$21,701.
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Farmer's market is open to all residents in Swissburg. Right now there are 28 farmers, each sells a unique variety of cheese. Cheese prices on the market vary from $4 to $26 per pound. Most farmers love the cheese they make and earn positive profits. What type of market is this? (monopoly, oligopoly, perfect competition, or monopolistic competition) Is it accurate to say that this market is definitely not in a short-run equilibrium because cheese prices do not appear to converge to one level? Can we say that this market is not in long-run equilibrium?
The type of market is monopolistic competition. It is also accurate to say that this market is not in short-run equilibrium and not in the long run equilibrium.
This is because there are many producers of similar but not identical products. Each of the 28 farmers has a unique variety of cheese to offer. They compete with each other to attract customers by selling their cheeses at a price lower than their competitors’.
It is also accurate to say that this market is not in short-run equilibrium because cheese prices do not appear to converge to one level. This is because of the unique varieties of cheese that each farmer offers. They are able to set their prices based on the uniqueness of their product. There is no standard price for cheese in this market, which means it is not in short-run equilibrium.
We can say that this market is not in long-run equilibrium because in long-run equilibrium, all firms in the industry would be earning zero economic profit. This is not the case in this market as most farmers love the cheese they make and earn positive profits. Therefore, the market is not in long-run equilibrium.
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The town of Khatmal has two citizens: a rich citizen (R) and a poor one (P). It has a road that leads to the neighbouring town; however, this road needs to be cleaned everyday, otherwise ash from the neighbouring thermal power plant settles on the road and makes it impossible to use it. Cleaning the road costs 1/- every day. R has to go to work in the neighbouring town and has to use this road, whereas P works in Khatmal and therefore do not use this road much. The daily income of R is 15/- and that of P is 10/-. Let x; denote the private good consumed by each citizen and m denote the amount of cleaning service provided. The cost of the private good is also 1. The utility functions of the two citizens are given by: UR = ln XR + 2ln m; Up = ln xp + ln m a. Set up the maximization problems for R and P. Let mR and mp denote the amount of road cleaning demanded by R and P, respectively. Without doing any math, describe whether you expect me and mp to be equal or different, and give two reasons for your answer. b. Solve mathematically for me and mp. What is the resulting utility of R and P? What is therefore the social surplus in the economy? The government of Khatmal is concerned that there is a market failure in the provision of road cleaning services and is considering a public provision option financed by taxes on R and P. However, the tax collector is unable to distinguish between R and P as it is each for R to disguise as P. Hence, the government is restricted to taxing everyone the same amount to finance the cleaning. I.e., if m units of cleaning are provided, everyone is charged m/2 in taxes. c. What amount of daily cleaning should the government provide to maximize social surplus (assume the government maximizes the sum of the utilities of R and P)? What would be the resulting utility of and P under this level of provision? Discuss any differences from the utilities in part b above, and also comment on any changes in social surplus. d. Does the sum of the individuals' marginal rates of substitution equal the price ratio? Why do you think? e. Now suppose that it is possible to distinguish between R and P, thus allowing differential taxation. Now how much of m does the government provide, and how is the tax burden divided? Calculate the sum of the individuals' marginal rates of substitution, and compare with part d above. Also calculate resulting individual and social surplus.
a) Maximization problem for R: max ln XR + 2ln m subject to 15 - X m - m >= 0. Maximization problem for P: max ln Xp + ln m subject to 10 - X m >= 0. If mR > mp, it would mean that R would pay more taxes but also get more benefit from the cleaning. The opposite would be true if mp > mR. Therefore, it is not clear whether mR and mp are equal or different.
b) Maximization problem for R: max ln XR + 2ln m subject to 15 - X m - m >= 0. Maximization problem for P: max ln Xp + ln m subject to 10 - X m >= 0. Solving the maximization problems, we get mR = mp = 1. The resulting utility of R is 2.3, and the resulting utility of P is 2.3. The social surplus in the economy is 1.6.
c) The government should provide 2 units of daily cleaning to maximize social surplus. The resulting utility of R is 2.38, and the resulting utility of P is 2.15. The utility of R is higher, and the utility of P is lower than in part b. The social surplus is 1.64, which is higher than in part b.
d) The sum of the individuals' marginal rates of substitution does not equal the price ratio. The reason for this is that the price ratio is the same for both individuals, but their marginal rates of substitution are not the same. Therefore, the sum of their marginal rates of substitution is not equal to the price ratio.
e) If it is possible to distinguish between R and P, the government should provide 1.5 units of daily cleaning. R should pay 0.75 in taxes, and P should pay 0.5 in taxes. The sum of the individuals' marginal rates of substitution is 3, which is higher than in part d. The resulting individual and social surplus are as follows: UR = 2.81, Up = 2.39, and social surplus = 1.42.
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Let the Canadian economy be described below. You are an economist in the Department of Finance, Ottawa. C=60+0.9Y (Yg is disposable income) I=300 (Investment spending) G=120 (Government purchases) NT=0.1Y (Net taxes) X= 120 (Exports are constant) IM= 0.31Y (Imports depend positively on our own Y) a) Calculate the equilibrium Y. Y=0 b) Find the autonomous multiplier. Autonomous multiplier Y = 0 c) Find the government budget balance BB, given your Y in (a). BB=0 d) Oil prices have been rising recently. Higher crude oil prices translate to higher costs for gasoline, plastic and many products. Suppose the higher oil prices translate. to our investment spending dropping from 300 to 100 due to a weaker investment confidence. Find the new Y. Y = O e) Find the BB as a result of the drop in investment spending. BB-0 f) is this change in BB due to an increase in government spending, ie, is the Canadian government to be blamed? O Yes O No g) Suppose the government wants to push the economy back to the Y level in (a) but with the investment spending still at 1-100. Find the new G necessary. G=0
a) To find the equilibrium level of output (Y), we need to set aggregate demand (AD) equal to aggregate supply (AS).
AD = C + I + G + (X - IM)
= (60 + 0.9Y) + 300 + 120 + (120 - 0.31Y)
AS = Y
Setting AD equal to AS:
60 + 0.9Y + 300 + 120 + 120 - 0.31Y = YSimplifying the equation:
600 - 0.41Y = YCombining like terms:
1.41Y = 600Dividing both sides by 1.41:
Y = 425.53Therefore, the equilibrium level of output (Y) is approximately 425.53.
b) The autonomous multiplier is the change in equilibrium output divided by the change in autonomous spending. In this case, autonomous spending refers to investment (I).
Change in Y = Y - Y0
= 425.53 - 0
= 425.53
Change in I = I - I0
= 100 - 300
= -200
Autonomous multiplier (k) = Change in Y / Change in I
= 425.53 / -200
= -2.128
Therefore, the autonomous multiplier is approximately -2.128.
c) The government budget balance (BB) is calculated as the difference between government purchases (G) and net taxes (NT).
BB = G - NT
= 120 - 0.1Y
Substituting the equilibrium output (Y = 425.53):
BB = 120 - 0.1(425.53)
= 120 - 42.553
= 77.447
Therefore, the government budget balance (BB) is approximately 77.447.
d) Given that investment spending drops from 300 to 100, we need to adjust the equation for aggregate demand (AD):
AD = C + I + G + (X - IM)
= (60 + 0.9Y) + 100 + 120 + (120 - 0.31Y)Setting AD equal to AS:
60 + 0.9Y + 100 + 120 + 120 - 0.31Y = YSimplifying the equation:
400 - 0.41Y = YCombining like terms:
1.41Y = 400Dividing both sides by 1.41:
Y = 283.69Therefore, the new equilibrium level of output (Y) is approximately 283.69.
e) The government budget balance (BB) is calculated as the difference between government purchases (G) and net taxes (NT).
BB = G - NT
= 120 - 0.1Y
Substituting the new equilibrium output (Y = 283.69):
BB = 120 - 0.1(283.69)
= 120 - 28.369
= 91.631
Therefore, the government budget balance (BB) is approximately 91.631.
f) No, the change in the government budget balance (BB) is not due to an increase in government spending. It is primarily caused by the drop in investment spending.
g) To push the economy back to the equilibrium level of output (Y = 425.53) with investment spending still at 100, we can calculate the new required level of government purchases (G).
AD = C + I + G + (X - IM)
= (60 + 0.9Y) + 100 + G + (
120 - 0.31Y)
Setting AD equal to AS:
60 + 0.9Y + 100 + G + 120 - 0.31Y = YSimplifying the equation:
280 + 0.59Y + G = YRearranging the equation:
0.41Y - G = 280Since we want the investment spending to remain at 100, we substitute I = 100:
0.41Y - 100 = 280Solving for Y:
0.41Y = 380Y = 926.83Therefore, the new required level of government purchases (G) to push the economy back to the equilibrium level of output is approximately 926.83.
About InvestmentInvestment, is a activity, either directly or indirectly, with the hope that in the future the owner of the capital will receive a number of benefits from the results of the investment.
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According to Barak Obama, ""middle-class squeeze"" is largely due to ethical problems with:
O corporate culture
O the white community
O the black community
O racism, sexism, and power
According to Barack Obama, the "middle-class squeeze" is largely due to ethical problems with Corporate culture.
Barack Obama has highlighted corporate culture as a significant factor contributing to the "middle-class squeeze." Corporate culture refers to the values, norms, and behaviors that exist within an organization, particularly in relation to the treatment of employees and the pursuit of profit. Obama suggests that ethical problems within corporate culture can contribute to the challenges faced by the middle class.
This perspective aligns with Obama's broader concerns about income inequality and economic opportunities for the middle class. He argues that when corporations prioritize profits over the well-being of their employees and the broader society, it can exacerbate the squeeze on the middle class. This can manifest through stagnant wages, reduced job security, and limited upward mobility.
By highlighting corporate culture as a key factor, Obama emphasizes the need for ethical reforms within the business world to address the middle-class squeeze and promote a more inclusive and prosperous society.
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Conway, Kip, and Zack are partners with capital balances as follows: Conway, $367,200; Kip, $122,400; and Zack, $244,800. The partners share incomes and losses in a 30%: 40%: 30% ratio. Young is admit
After admitting Young as a new partner, the capital balances of the partners would be as follows:
Conway: $305,000
Kip: $102,000
Zack: $204,000
Young: $0
To determine the new capital balances after admitting Young as a partner, we need to calculate the new capital contributions and adjust the existing capital balances accordingly.
The given information states that Conway, Kip, and Zack have capital balances of $367,200, $122,400, and $244,800, respectively. The income and losses are shared in a 30%:40%:30% ratio.
First, we calculate the total capital of the existing partners:
Total capital = Conway's capital + Kip's capital + Zack's capital
Total capital = $367,200 + $122,400 + $244,800
Total capital = $734,400
Next, we determine the individual capital contributions of the partners based on the given income-sharing ratio:
Conway's capital contribution = Total capital * Conway's ratio
Conway's capital contribution = $734,400 * 30%
Conway's capital contribution = $220,320
Kip's capital contribution = Total capital * Kip's ratio
Kip's capital contribution = $734,400 * 40%
Kip's capital contribution = $293,760
Zack's capital contribution = Total capital * Zack's ratio
Zack's capital contribution = $734,400 * 30%
Zack's capital contribution = $220,320
The new capital balances would be the sum of the capital contributions and the existing capital balances:
Conway's new capital balance = Conway's capital contribution + Conway's existing capital
Conway's new capital balance = $220,320 + $367,200
Conway's new capital balance = $587,520
Kip's new capital balance = Kip's capital contribution + Kip's existing capital
Kip's new capital balance = $293,760 + $122,400
Kip's new capital balance = $416,160
Zack's new capital balance = Zack's capital contribution + Zack's existing capital
Zack's new capital balance = $220,320 + $244,800
Zack's new capital balance = $465,120
Finally, since Young is being admitted as a new partner, their capital balance would initially be $0 until they make a capital contribution.
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Answer the questions following the fact patterns using the IRAC format:
1) James and Conrad enter into a valid contract that reads, "Conrad will pick-up and deliver to James a car. Conrad will drive the car from New York to James' residence in California."
A] While driving the car to California Conrad is involved in an accident with Aileen. Aileen sues Conrad and wins. Conrad pays Aileen. What is Conrad's best argument to recover from James?
IRAC format refers to Issue, Rule, Analysis, and Conclusion. I. Issue: Can Conrad recover from James for the damages he paid to Aileen as a result of the accident?
R. Rule: To determine Conrad's best argument, we need to consider the principles of contract law. Generally, a party may seek indemnification or reimbursement from another party if there is an agreement or legal basis for such recovery.
A. Analysis: 1) In this case, Conrad entered into a valid contract with James, which obligated Conrad to pick up and deliver a car from New York to James' residence in California.
2) The contract does not explicitly address the issue of liability for accidents or damages incurred during transportation.
3) Generally, absent any specific contractual provisions, a party may not hold the other party liable for damages resulting from the performance of a contract unless there is a breach of duty or negligence.
4) However, in this situation, Conrad may argue that James should bear the responsibility for the accident and the resulting damages.
5) Conrad's argument could be based on the implied warranty of workmanlike performance, which implies that the person performing the contract has the necessary skills and will carry out the task in a reasonably competent manner.
6) Conrad can contend that James breached this implied warranty by providing a defective car or by failing to disclose any known mechanical issues that contributed to the accident.
7) If Conrad can establish that James breached the implied warranty and this breach directly caused the accident, Conrad may have a valid argument for recovering from James.
C. Conclusion:Conrad's best argument to recover from James would be based on the implied warranty of workmanlike performance. If Conrad can show that James provided a defective car or failed to disclose known mechanical issues that led to the accident, Conrad may be able to seek indemnification or reimbursement from James for the damages paid to Aileen.
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chrysalis financial is offering a 3-year certificate of deposit with semi-annual compounding at 2.30%. you invest $5,175 in the certificate today. on the maturity date, the investment will be worth:
On the maturity date, the investment will be worth approximately [tex]\$5,654.96[/tex].
To calculate the future value of the investment at maturity, we can use the formula for compound interest with semi-annual compounding:
[tex]\[A = P \left(1 + \frac{r}{n}\right)^{nt}\][/tex]
Where:
[tex]A[/tex] is the future value (maturity value) of the investment,
[tex]P[/tex] is the initial principal (investment amount),
[tex]r[/tex] is the interest rate (2.30%),
[tex]n[/tex] is the number of compounding periods per year (2 for semi-annual compounding),
and [tex]t[/tex] is the number of years (3).
Substituting the given values into the formula:
[tex]\[A = \$5175 \left(1 + \frac{0.0230}{2}\right)^{(2 \times 3)}\][/tex]
Simplifying the formula:
[tex]\[A = \$5175 \times (1.0115)^6\][/tex]
Calculating the future value:
[tex]\[A \approx \$5,654.96\][/tex]
With an initial investment of [tex]\$5,175[/tex] in a 3-year certificate of deposit at a 2.30% interest rate compounded semi-annually, the investment will be worth approximately [tex]\$5,654.96[/tex] at maturity.
Therefore, on the maturity date, the investment will be worth approximately [tex]\$5,654.96[/tex].
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Problem 3-12A (Algo) Nigel McCloskey is a waiter at Albicious Foods in South Carolina. He is single with one other dependent. He receives the standard tipped hourly wage. During the week ending Octobe
The payroll register for Nigel McCloskey for the week ending October 22, 20XX will include:
Regular hours: 44 hoursOvertime hours: NoneOvertime earnings: $0.00Tips: $210.00.What is Nigel McCloskey's gross pay for the week ending?To get Nigel McCloskey's gross pay, we need to consider his regular hourly wage, overtime pay, and tips.
We will calculate his regular earnings:
Regular hours worked: 44 hours
Regular hourly wage: Standard tipped hourly wage
Regular earnings = Regular hours worked x Regular hourly wage
Overtime hours worked: None (as Nigel worked 44 hours, which is within the regular hours limit)
Overtime hourly wage: Standard tipped hourly wage x 1.5
Overtime earnings = Overtime hours worked x Overtime hourly wage
Gross pay = Regular earnings + Overtime earnings + Tips.
Full question:
Nigel McCloskey is a waiter at Albicious Foods in South Carolina. He is single with one other dependent. He receives the standard tipped hourly wage. During the week ending October 22,20XX, he worked 44 hours and received $210 in tips. Calculate his gross pay, assuming his tips are included in the overtime rate determination. Complete the payroll register for Nigel McCloskey.
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Please read the "Focus on International Issues" on the top of page 120 in your textbook. After reading, please discuss why Siemen's earnings were able to increase so much faster than their revenue? What would happen if their revenue would have fallen by 9.4%?
From 2017 to 2019 nestles revenue increased only 3.1 percent, but its operating earnings increased 59.0 percent. In other words its profit grew 19 times as fast as its revenue.
class is Managerial Accounting
FOCUS ON INTERNATIONAL ISSUES COST-VOLUME-PROFIT ANALYSIS AT A SWISS COMPANY The greater the percentage of a company's total costs that are fixed, the more sensitive the company's earnings are to changes in rev- enue or volume. Operating leverage, the relationship between the changes in revenue and changes in earnings, introduced earlier, applies to companies throughout the world, large or small. Nestle Manufacturing companies often have significant fixed costs. Nestle Group, SA is a large, food manufacturing company head- quartered in Vevey, Vaud, Switzerland. Most college students will be familiar with its candy products, but it is also a major producer in infant formulas. From 2017 through 2019 Nestle's revenues increased only 3.1 percent, but its operating earnings increased 59.0 percent. In other words, its profit grew 19 times as fast as its revenue (volume). This is a classic example of the effects of fixed costs, whether measured in dollars, euros, or Swiss francs. Studying Nestle offers insight into a true global enterprise. Though headquartered in Switzerland, it does business in almost ev- ery county in the world. In 2019 it generated less than 25 percent of Klaus Ohlenschlaeger/Alamy its revenues in Europe, let alone Switzerland. Its financial statements are presented in Swiss francs (CHFs), but it does business in 11 other major currencies. Its stock is currently traded on the SIX Swiss Stock Exchange, but it can also be purchased using ADRS (American De- pository Receipts) on the over-the-counter market in the United States.
Siemens' earnings were able to increase so much faster than their revenue due to the fixed costs that were reduced over the year, and as a result, they were able to produce a higher level of earnings.
With the reduction in fixed costs, Siemens was able to cut back on expenses and streamline their business practices, leading to a faster growth in earnings. If their revenue would have fallen by 9.4 percent, Siemens would have been negatively impacted.
With the reduction in revenue, Siemens would have experienced a significant decrease in earnings, which would have hurt the company's profits. The company would have had to cut back on expenses in order to maintain its bottom line, which would have impacted the business's operations and growth moving forward. This shows that in companies where fixed costs are high, even small changes in revenue can have a significant impact on earnings, as well as the overall performance of the company.
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Be prepared to discuss and explain what a mutual fund is and all
the advantages of a mutual fund.
A mutual fund is a type of financial investment in which money from multiple investors is pooled together to purchase a portfolio of various securities like stocks, bonds, or other assets.
What are the advantages of a mutual fund?
Following are the advantages of a mutual fund:
1. Diversification: Mutual funds spread the investment over multiple securities, which reduces the risk and increases returns.
2. Professional Management: Mutual funds are managed by professional fund managers who have experience in the market. They have the responsibility of investing the money of their investors and ensuring the best returns possible.
3. Accessibility: Mutual funds are readily available to investors with even a small amount of money.
4. Flexibility: Mutual funds allow for a lot of flexibility in terms of investment options. Investors can choose to invest in funds that cater to their risk tolerance levels.
5. Liquidity: Mutual funds offer easy access to cash as they can be easily bought and sold.
6. Cost-effective: Due to economies of scale, mutual funds have lower transaction costs than individual investors.
7. Transparency: Mutual funds publish their NAV (Net Asset Value) regularly, which ensures transparency in pricing and operations.
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If the interest on a note is 12.0% and the principal was $110,000, what is the maturity value of the note if the note is payable in 8 months? O $13,200 O $123,200 $8,800 O $118,800
Given that the interest on a note is 12.0% and the principal was $110,000. We have to find the maturity value of the note if the note is payable in 8 months.
Since the principal was $110,000 and the interest on the note is 12.0%. The interest would be the product of principal and interest rate per annum times time in years. Here, time is given in months; therefore, we need to convert it into years by dividing it by 12.Maturity Value = Principal + InterestInterest = (Principal × Rate × Time)/100Where,P = $110,000R = 12% per annumT = 8/12 yearsNow, we can use the above formula to calculate the interest.
I = (110,000 × 12 × 8/12) / 100= (110,000 × 1 × 2/3) / 100= $2,200Maturity Value = Principal + Interest= $110,000 + $2,200= $112,200Hence, the maturity value of the note is $112,200.
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Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.
Before computing the break-even point and margin of safety ratio, let's first calculate the new variable cost of the shoes using the information provided. Variable cost per pair of shoes = $24Fixed cost = $270,000 + $24,000 = $294,000New selling price per pair of shoes = $38The contribution margin per pair of shoes can now be computed as follows:
Contribution margin = Selling price per pair of shoes - Variable cost per pair of shoes Contribution margin = $38 - $24Contribution margin = $14Now, let's compute the break-even point:
BEP = Fixed cost / Contribution marginBEP = $294,000 / $14BEP ≈ 21,000 pairs of shoes Next, let's compute the margin of safety ratio:Margin of safety ratio = (Current sales - BEP) / Current sales margin of safety ratio = (20,000 - 21,000) / 20,000Margin of safety ratio = -0.05 or -5%This negative result suggests that the store is not making any profits, as it is operating below its break-even point. Therefore, the store should be wary of the effects of the changes on the margin of safety ratio.
Preparing the CVP income statement, before the changes, will give: Sales revenue = 20,000 × $40 = $800,000Variable costs = 20,000 × $24 = $480,000Contribution margin = $320,000Fixed costs = $270,000Net income before taxes = $50,000After the changes, the CVP income statement will be: Sales revenue = 24,000 × $38 = $912,000Variable costs = 24,000 × $24 = $576,000Contribution margin = $336,000Fixed costs = $294,000Net income before taxes = $42,000
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Section B: Problem Solving- Show all workings (60 points) Problem 1 (Allocate Transaction Price, Upfront Fees) Blue PC sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms: 1. Tablet Bundle A sells a tablet with 4 years of Internet service. The price for the tablet and a 4- year Internet connection service contract is $600. The standalone selling price of the tablet is $300 (the cost to Blue PC is $225). Blue PC sells the Internet access service independently for an upfront payment of $420. On January 2, 2020, Blue PC signed 100 contracts, receiving a total of $60,000 in cash. 2. Tablet Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 4-year contract period. That product bundle sells for $750. Blue PC provides the 4-year tablet service plan as a separate product with a standalone selling price of $200. Blue PC signed 400 contracts for Tablet Bundle B on July 1, 2020, receiving a total of $300,000 in cash. Instructions (a) Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2020, and December 31, 2020. (12 Points) (b) Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1, 2020, and December 31, 2020. (15 Points) (c) Repeat the requirements for part (a), assuming that Blue PC has no reliable data with which to estimate the standalone selling price for the Internet service. (8 Points)
a)Revenue for Tablet Bundle A is $11,475 to be recognized in 2021, 2022, and 2023 ($38.25 x 100 contracts) x 1 year = $3,825 to be recognized in 2020. b) Revenue for Tablet Bundle B is $137,500 to be recognized in 2021, 2022, and 2023 [($750 - $200) x 400 contracts] / 4 = $34,375 to be recognized in 2020. c) Total revenue to be recognized in 2020: $726.86.
(a) On January 2, 2020, Blue PC signed 100 contracts for Tablet Bundle A, receiving $60,000 in cash. To record the revenue arrangement, Blue PC needs to allocate the transaction price between the tablet and the internet service. The standalone selling price of the tablet is $300, and since there is reliable data to estimate the standalone selling price of internet service ($420), the amount allocated to the internet service is $300 ($600 - $300). The journal entry to record the revenue arrangement on January 2, 2020, is as follows:
Cash $60,000 Unearned revenue $60,000
To record the receipt of cash for 100 contracts signed for Tablet Bundle A.
On December 31, 2020, when the internet service will be provided, Blue PC should recognize revenue for the internet service. The journal entry to record this is as follows:
Unearned revenue $30,000 Service revenue $30,000
To record the revenue recognition for the 4-year internet service included in Tablet Bundle A for one year.
(b) On July 1, 2020, Blue PC signed 400 contracts for Tablet Bundle B, receiving $300,000 in cash. To record the revenue arrangement, Blue PC needs to allocate the transaction price between the tablet, internet service, and tablet service plan. The standalone selling price of the tablet is $300 ($225 cost), the internet service is $420, and the tablet service plan is $200. Therefore, the amount allocated to the tablet, internet service, and tablet service plan is $252 ($750 * $300/$920), $372 ($750 * $420/$920), and $126 ($750 * $200/$920), respectively. The journal entry to record the revenue arrangement on July 1, 2020, is as follows:
Cash $300,000 Unearned revenue $300,000
To record the receipt of cash for 400 contracts signed for Tablet Bundle B.
On December 31, 2020, when the internet service will be provided, Blue PC should recognize revenue for the tablet, internet service, and tablet service plan for six months. The journal entry to record this is as follows:
Unearned revenue $75,600 Service revenue $37,800 Tablet revenue $50,400 Deferred revenue $126,000
To record the revenue recognition for the 4-year tablet service plan, internet service, and tablet for six months in Tablet Bundle B.
(c) Assuming that Blue PC has no reliable data with which to estimate the standalone selling price for the Internet service, the company can estimate it using the residual method, where the selling price for the tablet is subtracted from the total selling price of the bundle to arrive at the implied price of the internet service. The implied price of the internet service in Tablet Bundle A is $300 ($600-$300), and in Tablet Bundle B, it is $400 ($750-$300). The journal entries for revenue recognition on January 2, 2020, and July 1, 2020, will remain the same as in parts (a) and (b), but the amounts allocated to the internet service will be different ($300 for Tablet Bundle A and $400 for Tablet Bundle B).
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