Answer:
Lowland should recognize a contingent liability of:
$230,000 in the current period.
Explanation:
a) Data and Calculations:
Estimated amount for lawsuit settlement:
$180,000 * 50% = $90,000
$280,000 * 50% = $140,000
$230,000
b) Lowland's contingent liability to ABC Company is the liability that may occur depending on the outcome of the lawsuit, which is in itself an uncertain future event. A contingent liability is recorded if the contingency is likely or probable, already established by Lowland's legal counsel, and the amount of the liability can be reasonably estimated.
Recently, Galaxy Corporation lowered its allowance for doubtful accounts by reducing bad debt expense from 2% of sales to 1% of sales. Ignore taxes. What are the immediate effects on operating income
Answer:
Lower bad debt expenses will result in higher operating income. The corporation operating cash flow is actually not affected until Galaxy actually collects the receivables.
In this case:
- The effect on Operating income would be High
- The effect on Operating cash flows is No effect
create a development plan for a business management student
What is a Professional Development Plan?
A Professional Development Plan (PDP), also known as an Employee Development Plan or an Individual Development Plan, is used to document career goals and set out a strategy on how to meet them.
Creating a PDP takes time and planning. But, writing and implementing a PDP can help you to identify and develop the professional skills needed to reach your goals, and can keep you on the track to success. It’s an important process that helps you achieve your potential, reach your goals and take charge of your professional development.
Now is the time to start thinking about where you want your future to take you.
How to Write a Professional Development Plan
There are 9 steps to completing a PDP:
Assess where you are now.
Identify your specific career goals.
Gather information.
Identify what professional skills you already have and which you need to work on.
Choose how you will accomplish your goals.
Develop a timeline for accomplishing your specific targets and goals.
Write it all down.
Evaluate your plan.
Measure your progress.
Answer:
1)Set your destination. ...
2)Focus your approach. ...
3)Define your marketing channels. ...
4)Choose KPIs and create dashboards to keep you on track. ...
5)Define your sales process to align with your customer's needs. ...
6)Determine resource needs. ...
7)Share your business development plan with stakeholders.
Consider the exchange rate between Lebanon and Canada. Typically, exchange rates vary over time, sometimes quite dramatically. The scenarios present various changes that may affect the exchange rate. Identify whether each scenario will tend to cause an appreciation, depreciation, or have no effect on the exchange rate of Lebanese pounds relative to Canadian dollars. The magazine The Economist publishes an article indicating that analysts expect the value of Canadian dollars to rise relative to Lebanese pounds. The central bank in Lebanon announces that it is going to raise interest rates on government bonds. Based on a World Bank report, the inflation rate in Lebanon is going to be 5% next year, whereas the inflation rate in Canada is going to be 9.5% . The price of a specific basket of goods in Lebanon is roughly 1.3 times higher than the price of an identical basket of goods in Canada even after adjusting for the exchange rate.
Answer and Explanation:
1. The magazine The Economist publishes an article indicating that analysts expect the value of Canadian dollars to rise relative to Lebanese pounds: if the expectation from analysts is that the value of Canadian dollars will rise relative to Lebanese pounds then the demand for Canadiam dollars will increase therefore increasing the value/appreciate relative to Lebanese pounds.
2. The central bank in Lebanon announces that it is going to raise interest rates on government bonds: This will bring about appreciation in Lebanese pounds relative to Canadian dollars since increase in interest rate in bonds increases investment in government bonds in Lebanese pounds.
3. Based on a World Bank report, the inflation rate in Lebanon is going to be 5% next year, whereas the inflation rate in Canada is going to be 9.5%: A high inflation rate is a negative for the economy. Since inflation rate increases for both economies, there is likely to be a counter effect hence no effect on exchange rates.
4. The price of a specific basket of goods in Lebanon is roughly 1.3 times higher than the price of an identical basket of goods in Canada even after adjusting for the exchange rate: if this basket of goods is used in calculation of consumer price index(CPI) which is representative of the rate of inflation in the economy, then Lebanese pounds will depreciate relative to Canadian dollars since inflation rate has increased relative to the Canadian economy.
Sheffield Corp. is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6450000 on March 1, $5350000 on June 1, and $8250000 on December 31. Sheffield Corp. borrowed $3250000 on January 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 3-year, $6410000 note payable and an 9%, 4-year, $12750000 note payable. What are the weighted-average accumulated expenditures
Answer:
$8,495,833
Explanation:
Calculation of weighted-average accumulated expenditures
Date Payments Funds used Annualized Amount
Mar 1 $6450000 10/12 $6450000*10/12 $5,375,000
Jun 1 $5350000 7/12 $5350000*7/12 $3,120,833
Dec 31 $8250000 0/12 $$8250000*0/12 $0
Weighted Average Expenditures $8,495,833
A company purchased property for a building site. The costs associated with the property were: Purchase price $ 184,000 Real estate commissions 15,900 Legal fees 1,700 Expenses of clearing the land 2,900 Expenses to remove old building 1,900 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building
Answer: The portion of these costs that will be allocated to the cost of the land is $206,400 and the portion that should be allocated to the cost of the new building is 0.
Explanation:
The following information can be gotten from the question:
Purchase price = $184,000
Real estate commissions = $15,900
Legal fees = $1,700
Expenses of clearing the land = $2,900
Expenses to remove old building = $1,900
Therefore, the portion of these costs should be allocated to the cost of the land will be:
= $184,000 + $15,900 + $1,700 + $2,900 + $1,900
= $206,400
It should also be noted that building cost will be 0.
Tasty Time Cafeteria operates cafeteria food services in public buildings in the Midwest. Tasty Time is contemplating a major change in its cost structure. Currently, all of their cafeteria lines are staffed with hourly wage employees who hand serve the food to customers. Benson Riggs, Tasty Time’s owner, is considering replacing the employees with an automated self-service system. However, before making the change, Benson would like to know the consequences of the change, since the volume of business varies significantly from location to location. Shown below are the CVP income statements for each alternative.
Personal Service System Automated Self-Service System
Sales $2,280,000 $2,280,000
Variable costs 1,710,000 1,140,000
Contribution margin $570,000 $1,140,000
Fixed costs 114,000 684,000
Net Income $456,000 $456,000
Required:
a. Determine the degree of operating leverage for each alternative.
b. Which alternative would produce the higher net income if sales increased by $228,000?
Answer:
a. Personal Service System = 1.25 and Automated Self-Service System = 2.50
b. Automated Self-Service System will produce the higher net income.
Explanation:
1. Degree of Operating Leverage (DOL)
Degree of Operating Leverage (DOL) shows the times Earnings Before Interest and Tax (EBIT) will change as a result of a change in sales contribution.
Degree of Operating Leverage (DOL) = Contribution ÷ Earnings Before Interest and Tax
Therefore,
Degree of Operating Leverage (DOL) for each service will be as follows :
Personal Service System = $570,000 ÷ $456,000
= 1.25
Automated Self-Service System = $1,140,000 ÷ $456,000
= 2.50
2. Effect on Net Income
If Sales increase by $228,000, that is a 10 % increase.
Which will have the following effect on Net Incomes of the proposed services :
Personal Service System = 10 % × 1.25 = 12.5 %
Automated Self-Service System = 10 % × 2.50 = 25 %
Conclusion
Automated Self-Service System will produce the higher net income.
Use the following information for Jake Company: Sales Revenue .......................................... $2,000,000 Interest/Dividend Revenue .................. 50,000 Cost-of-Goods- Sold ............................ 1,000,000 Selling and Administrative Expenses.. 200,000 Loss on Discontinued Operations ..... 100,000 Unearned Revenue .............................. 100,000 What is Net Income for the Year Ended December 31, 2020 (ignore taxes)
Answer: $750,000
Explanation:
Net Income
Sales Revenue 2,000,000
Interest/ Dividend Revenue 50,000
2,050,000
Cost of Goods sold (1,000,000)
Selling and Admin expenses (200,000)
Loss on Discontinued (100,000)
Net Income $750,000
A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two alternatives: buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. However, the cost per machine would be lower if the two machines were purchased at the same time. The estimated probability of low demand is .30, and the estimated probability of high demand is .70. The net present value associated with the purchase of two machines initially is $75,000 if demand is low and $130,000 if demand is high. The net present value for one machine and low demand is $90,000. If demand is high, there are three options. One option is to do nothing, which would have a net present value of $90,000. A second option is to subcontract; that would have a net present value of $110,000. The third option is to purchase a second machine. This option would have a net present value of $100,000. How many machines should the manager purchase initially
Answer:
BUY TWO MACHINES
Explanation:
Calculation for how many machines should the manager purchase initially
BUY ONE MACHINE =(High demand 0.7*100,000)+(Low demand 0.3*90,000)
BUY ONE MACHINE =70,000+27,000
BUY ONE MACHINE=97,000
Note :High demand 100,000 is the Average of Do nothing ,Tomorrow Sub-contract and Buy second machine
High demand=90,000+110,000+100,000
High demand=300,000/3
High demand=100,000
BUY TWO MACHINES
High demand =(0.7 x 130000)
High demand= 91,000
Low demand= (0.3 x 75000)
Low demand=22,500
Hence,
BUY TWO MACHINES= (91,000 + 22,500)
BUY TWO MACHINES=113,500
Based on the above calculation we can see that
the expected payoff from BUY ONE MACHINE is 97,000 while that of BUY TWO MACHINES is 113,500 which means that BUY TWO MACHINES is higher hence, the manager should BUY TWO MACHINES today.
For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present ValueYears Interest RateFuture value$ 13 7% $15,251 4 13 49,557 29 14 884,073 40 9 548,164
Answer:
Present Value = Future Value / ( 1 + interest rate) ^ years
1. Present Value = 15,251 / ( 1 + 7%)¹³
= $6,328.62
2. Present value = 49,557 / (1 + 13%)⁴
= $30,394.24
3. Present value = 884,073 / ( 1 + 14%)²⁹
= $19,780.96
4. Present Value = 548,164 / (1 + 9%)⁴⁰
= $17,452.22
Bob is angry at his company XYZ Corp. since his annual bonus was too small. Bob who has authority to sign checks on behalf of XYZ decides to get even by creating an employee, Steven Even. Bob writes a check to Steven on XYZ's checking account, signs it and then he indorses it with Steven's name and deposits it an account he has opened in Steven Even's name and the check clears. XYZ finds out and wants to hold the bank liable for paying the check since there was a forged indorsement. Which of the following is true?
1. The bank needs to pay because of the imposter rule.
2. The bank only needs to pay if the check was for more than $500.
3. The bank needs to pay because when there is a forged indorsement, the first person
to take the instrument with the forged indorsement is liable.
4. The bank does not need to pay because of the fictitious payee rule.
Answer: The bank does not need to pay because of the fictitious payee rule
Explanation:
The fictitious payee rule states that in a scenario whereby a person or a bank collects a negotiable instrument like a check and then pays the check to the fictitious person, the drawer of the check is responsible and the loss doesn't fall on the third party who accepted the instrument or in this case, the bank that cashed the check.
Therefore, based on the explanation above, the option that is true is that "the bank does not need to pay because of the fictitious payee rule".
Global Exporters wants to raise $29.6 million to expand its business. To accomplish this, it plans to sell 20-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 7.75 percent. What is the minimum number of bonds it must sell to raise the money it needs
Answer:
135,436 bonds
Explanation:
Calculation for the minimum number of bonds it must sell to raise the money it needs
First step is to calculate the Bond price
Bond price = $1,000 / [1 + (.0775 / 2)](20 × 2)
Bond price = $218.554
Second step is to calculate the Number of bonds
Number of bonds = $29,600,000 / $218.544
Number of bonds= 135,436 bonds
Therefore the minimum number of bonds it must sell to raise the money it needs will be 135,436 bonds
Bothell Construction, LLC, Ballard Remodel, Inc., and Tim's House Painting Company agreed that on three upcoming projects, Ballard Remodel would bid lowest on one, Bothell Construction would submit the lowest bid on the second project, and Tim's House Painting would submit the lowest bid on the third project. All three discussed this and agreed that this would be the best way that each would be assured of work for the upcoming season. This behavior:
Answer:
violates ethical, but not legal, standards.
Explanation:
Sherman act was created to prohibit restrains on trade of any collusion by different parties to form a monopoly or control price.
The act does not however prohibit all restraints of trade, bit rather those that are very unreasonable and harmful to competition.
In the given scenario the three companies only agreed to bid lowest for the 3 project under consideration.
Their action does not give them unfair advantage over other firms and may even lead to a loss on their part.
They do not have a strategy that will guarantee an edge over other firms.
So this is an ethical violation but not a legal one.
Question 4 of 10
Charging a lower price per unit for purchases of more units is called a
A. seasonal discount
B. quantity discount
C. sale price
D. stocking allowance
Ms. McClure is thinking about getting her master's degree in education. She estimates that she will spend about $12,000 a year for three years to get her degree. Her plans are to take evening classes so she can keep her current teaching job. When she finishes her degree, she will get a $5,000 a year raise.
Required:
How long will it take her to recover her investment?
Answer:
ehshdhdhfbdhwiejfhfuebdbchfudhrj
Explanation:
jdo
Carla Vista Company purchased equipment that cost $3980000 on January 1, 2020. The entire cost was recorded as an expense. The equipment had a 9-year life and a $122000 residual value. Carla Vista uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Carla Vista is subject to a 40% tax rate. Before the correction was made and before the books were closed on December 31, 2022, retained earnings was understated by
Answer:
$1,800,402
Explanation:
Cost = $3,980,000
Lifespan = 9 yrs
Residual Value = $122,000
Depreciation per year = (Cost - Residual Value)/life
Depreciation per year = (3,980,000 - 122,000)/9
Depreciation per year = 3,858,000 / 9
Depreciation per year = $428,667
So, Tax saved = 40% of $428,667 = $171,467
Depreciation per year not considered = 3 yrs * $428,667 = (+)$1,286,001
Tax saved due to Depreciation = 3 yrs * $171,467 = (+)$514,401
So, retained earnings was understated by $1,286,001 + $514,401 = $1,800,402
Pexura731 Corporation conducts get-rich-quickly workshops and uses two measures of activity, classes and students, in the cost formulas in its internal financial and operating reports. The cost formula for workshops is $450 per month plus $105 per class plus $25 per student. Pexura731 expected its activity in January to be 15 classes and 125 students, but the actual activity was 9 classes and 108 students. (ID#92589) The actual cost for workshops in January was $4,450. Q) What was Pexura731's spending variance for workshops in January?
Answer:
355 (Unfavorable)
Explanation:
Budgeted Cost for Actual Output = $450 + ($105 * Actual No of Classes) + ($28 *Actual No of Student)
Budgeted Cost for Actual Output = $450 + ($105*9) + ($25*108)
Budgeted Cost for Actual Output = $450 + $945 + $2,700
Budgeted Cost for Actual Output = $4,095
Actual Cost for Actual output = $4,450
Spending Variance = Actual Cost for Actual output - Budgeted cost for Actual Output
Spending Variance = $4,450 - $4,095
Spending Variance = 355 (Unfavorable)
It is Unfavorable as actual expenditure is more than what is budgeted.
The ship Audie Murphy leaves the New York Port with a ship load of GMC pick-up trucks bound for the Port of Istanbul, Turkey. A fire breaks out aboard the ship and destroys more than thirty GMC pick-up trucks. After an investigation it has been unable to determine the cause. Who is financially responsible for the damage
Answer: c. The Owner of the ship - Jack Palace
Explanation:
The investigation was unable to determine the cause of the fire. While this does not clear any party, it does not lay the blame on any party either.
In such a case the financial responsibility will fall on the company operating the transport company which in this case is Jack Palace who is the owner of the ship.
_____ comprises a range of practices concerned with increasing awareness, fostering learning, speeding collaboration and innovation, and exchanging insights of individuals, teams, or entire organizations.
a. Knowledge management
b. Sales management
c. Resource management
d. Disaster management
Answer:
A. Knowledge management.
Explanation:
This is said to be an organisational approach that explains, retain and structure the dispatch of knowledge amongst employees within an organisational setting. This approach is seen to posses different goals but primarily it is seen to maintain a reasonable amount of knowledge within the said organisation and also improvement in efficiency of the said workers ranging from the top management to the least in the core organisational settings. It is mostly seen to consist of varieties of initiatives, strategies and value creation through this process when been carried out judiciously.
Explain why it is difficult to validate the relationships between internal product attributes, such as cyclomatic complexity and external attributes, such as maintainability.
Answer and Explanation:
The difficulty occurs as of the external attributes like the maintainability is some how related to the developers and users who experiences the software it could be impacted by various things like their experiences, education, etc also they are not dependent upon the cyclomatic complexity. In addition to this, for validating these kind of attributes, here are some internal attributed like size, complexity, documentation that could be determined
In January 2021 Boxer Corporation purchased a patent at a cost of $219,000. Legal and filing fees of $59,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January 2024, Boxer spent $40,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2024 related to the patent should be: Multiple Choice $234,600. $ 67,800. $219,000. $ 40,000.
Answer:
$234,600
Explanation:
The computation of the amount charged is shown below;
Cost of patent os
= $219,000 + $59,000
= $278,000
Now
Amortization for 3 years i.e from 2021 to 2024
= ($278,000 ÷ 10) × 3
= $83,400
Now
Net cost of patent is
= $278,000 - $83,400
= $194,600
And, finally
Amount charged to income is
= $194,600 + $40,000
= $234,600
he Tattle Teller has a printing press sitting idly in its back room. The press has no market value to another printer because the machine utilizes old technology. The firm could get $250 for the press as scrap metal. The press is six years old and originally cost $148,000. The current book value is $2,570. The president of the firm is considering a new project and feels he can use this press for that project. What value, if any, should be assigned to the press as an initial cost of the new project
Answer: $250
Explanation:
The value that should be assigned to the press as an initial cost of the new project will simply be the relevant cost which has to.do with the opportunity cost that's what is forgone for something else to happen.
In this scenario, the value that should be assigned to the press as an initial cost of the new project will be $250 which is the value that the firm could get for the press as scrap metal.
Lily Products Company is considering an investment in one of two new product lines. The investment required for either product line is $540,000. The net cash flows associated with each product are as follows: Year Liquid Soap Body Lotion 1 $170,000 $ 90,000 2 150,000 90,000 3 120,000 90,000 4 100,000 90,000 5 70,000 90,000 6 40,000 90,000 7 40,000 90,000 8 30,000 90,000 Total $720,000 $720,000 a. Recommend a product offering to Lily Products Company, based on the cash payback period for each product line.
Answer and Explanation:
The computation of the payback period for each product line is as follows
(in dollars)
Year Liquid Soap Cumulative Body lotion Cumulative
1 170,000 170,000 90,000 90,000
2 150,000 320,000 90,000 180,000
3 120,000 440,000 90,000 270,000
4 100,000 540,000 90,000 360,000
5 70,000 610,000 90,000 450,000
6 40,000 650,000 90,000 540,000
7 40,000 690,000 90,000 630,000
8 30,000 720,000 90,000 720,000
So, the Payback period for Liquid soap is 4 years and Payback Period for Body Lotion is 6 Years respectively
Therefore we suggest liquid soap as it contains better paypack period as compared with the body lotion
If a preferred stock from Pfizer Inc. (PFE) pays $4.00 in annual dividends, and the required return on the preferred stock is 8.00 percent, what's the value of the stock?
a. $50.00
b. $0.32
c. $32.00
d. $0.50
Answer:
Option a ($50.00) seems to be the right approach.
Explanation:
The given values are:
Annual dividend is,
= $4.00
Required return is,
= 8.00% i.e., 0.08
By using the formula, we get
⇒ [tex]Value \ of \ the \ stock=\frac{Annula \ Dividend}{Required \ return}[/tex]
On putting the above given values, we get
⇒ [tex]=\frac{4.00}{0.08 }[/tex]
⇒ [tex]=50[/tex] ($)
Company A considers buying company B by means of a tender offer. Company B will accept any offer of A which reflects a fair value (namely, any offer which is not below the expected value of the project to B, given B's information). Company B is currently undertaking a major project. If the project is a complete failure the fair value of each share of B will be $60, and if it's a complete success the fair value of a share will be $120. The outcome of the project can vary from a complete failure to a complete success, and all outcomes are equally likely. That is, the fair value of a share of B can be any number between 60 and 120 equally likely. The management of A is significantly more skillful than that of B. Under the management of A the share price of B will be $20 higher than under the current management of B. Assume that the offer of A is made before the outcome of the project is known, but B will decide to accept or reject after the outcome is announced. What should A offer B in terms of a price per share
Answer:
the price per share in the case when A offers B is $200
Explanation:
The computation of the price per share is as follows:
The fair value is
= ($60 + $120) × 50%
= $90
The 50% represent the percentage of equally
Now the price per share is
= $90 + $90 + $20
= $90 + $110
= $200
Hence, the price per share in the case when A offers B is $200
The same is to be considered
The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents $ 10,319 Accounts receivable 79,922 Merchandise inventories 69,862 Prepaid expenses 6,000 Accounts payable $ 16,850 Notes payable 96,138 Other current liabilities 11,400 If net credit sales for the current year were $602,000, the firm's days' sales uncollected for the year is: (Use 365 days a year.)
Answer:
49 days
Explanation:
Account receivable turnover ratio = Net credit sales / Accounts receivable
Account receivable turnover ratio = $602,000 / $79,922
Account receivable turnover ratio = 7.53
Average collection period = 365/7.53
Average collection period = 48.47277556440903
Average collection period = 49
Thus, firm’s sales uncollected for year is 49 days.
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,047,000 and the variable costs were $860,000. The fixed costs of the division were $190,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
Answer:
$130,000 decrease
Explanation:
Multiple Choice $57,000 decrease $130,000 decrease $54,000 decrease $187,000 increase $187,000 decrease
Calculation of Financial advantage / Disadvantage
Decrease in contribution margin $187,000
(1,047,000-860,000)
Decrease in fixed expenses $57,000
(190000*30%)
Decrease in Net Operating Income $130,000 (Financial disadvantage)
Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Peyton is to receive $1,867,200 in cash. The purchaser is to assume Peyton's mortgage of $1,120,320 on the property. To enable the purchaser to obtain adequate financing, Peyton is to pay the $22,406 in points charged by the lender. The broker's commission on the sale is $74,688. What is Peyton's amount realized
Answer: $2,890,426
Explanation:
= Cash received + Mortgage assumed - Points paid by Peyton - Broker's ,commission
= 1,867,200 + 1,120,320 - 22,406 - 74,688
= $2,890,426
Famtrk153 Corp. is a popular car-wash operation that measures its activity in terms of number of cars washed. Last month, the budgeted level of activity was 1,140 cars washed and the actual level of activity was 1,130 cars washed. The cost formula for the washing expenses is $3.80 per car washed plus $21,000 per month. (ID#11659) The actual Famtrk153's washing expense was $21,700. Q) What was the Famtrk153's spending variance for the washing expenses last month?
Answer:
the spending variance is $3,594 favorable
Explanation:
The computation of the spending variance is as follows
Budgeted Expense is
= 1,130 cars × $3.80 per car + $21,000
= $4,294 + $21,000
= $25,294
And, the actual expese is $21,700
So, the spending variance is
= $25,294 - $21,700
= $3,594
Hence, the spending variance is $3,594 favorable
Q1. Big Money Monster is a business school. The school bases its budgets on two measures of activity: number of students and number of courses. The school uses the following data in its budgeting: Fixed cost per month Variable cost per student Variable cost per course Faculty wages $4,000 $0 $20 Course supplies $1,000 $10 $50 Administrative expenses $2,000 $20 $30 In July, the school budgeted for 300 students and 15 courses. Actual results for the month appear below: Number of Students 280 Number of Courses 18 Faculty wages $4,200 Course supplies $4,800 Administrative expenses $8,300 What is the spending variance for course supplies (choose the closest answer)
Answer:
Big Money Monster
The spending variance for course supplies is:
$50 Unfavorable.
Explanation:
a) Data and Calculations:
Fixed cost Variable cost Variable cost Total
per month per student per course
Faculty wages $4,000 $0 $20
Course supplies $1,000 $10 $50
Administrative expenses $2,000 $20 $30
Budgeted number of students = 300
Budgeted number of courses = 15
Actual number of students = 280
Actual number of courses = 18
Actual Faculty wages = $4,200
Actual Course supplies = $4,800
Budgeted Costs:
Fixed cost Variable cost Variable cost Total
per month per student per course
Faculty wages $4,000 $0 $20 $4,300
Course supplies $1,000 $10 $50 4,750
Administrative expenses $2,000 $20 $30 8,450
Budgeted costs:
Faculty wages = $4,000 + $0 + $20 * 15 = $4,300
Course supplies = $1,000 + $10 * 300 + $50 * 15 = $4,750
Administrative expenses = $2,000 + $20 * 300 + $30 * 15 = $8,450
Budgeted Cost of Course Supplies = $4,750
Actual Cost of Course Supplies = 4,800
Spending variance for Course Supplies = 50 Unfavorable
If the minimum attractive rate of return is 7%, which alternative should be chosen assuming identical replacement (like kind exchange)
A B
First Cost $5000 $9200
Uniform Annual Benefit $1750 $1850
Useful life ,in years 4 8
Answer:
The alternative that should be chosen assuming identical replacement is:
Alternative B.
Explanation:
a) Data and Calculations:
Alternatives:
A B
First Cost $5,000 $9,200
Uniform Annual Benefit $1,750 $1,850
Useful life, in years 4 8
Rate of return 7% 7%
Annuity factor 3.387 5.971
Present value of annuity $5,927.25 $11,046.35
Net cash flow $927.25 $1,846.35
b) Alternative B yields a higher return than Alternative A. Since the two alternatives are based on the same rate of return, Alternative B will bring in a higher annual benefit, even when discounted to the present value.