At 10 units of output, the firm has an average variable cost of $4,000.
To determine the average variable cost (AVC) of the firm, we need to understand the components involved. Total cost (TC) consists of two parts: fixed cost (FC) and variable cost (VC).
Given that at 10 units of output the firm's total fixed cost is $60,000, we can calculate the variable cost by subtracting the fixed cost from the total cost. So:
VC = TC - FC
VC = $100,000 - $60,000
VC = $40,000
Now, to find the average variable cost, we divide the variable cost by the level of output. In this case, we are given the output level of 10 units:
AVC = VC / Output
AVC = $40,000 / 10
AVC = $4,000
Therefore, the correct answer is $4,000. The average variable cost of the firm is $4,000 at 10 units of output.
It's important to note that average variable cost represents the cost per unit of variable inputs required to produce a given level of output. It indicates how efficiently the firm is using its variable inputs, such as labor and raw materials, as the output level changes.
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eric has saved $18,300 toward a down payment on a house. he makes a salary of $59,750 a year. what is the maximum he could afford to borrow to buy a house? responses $90,500 $90,500 $101,200 $101,200 $119,500 $119,500 $137,800 $137,800
Eric's annual salary of $59,750, his maximum allowable monthly housing expenses would be approximately $1,400.58, and his maximum allowable monthly debt payments would be around $1,494.58. With his savings of $18,300.
To determine the maximum amount Eric could afford to borrow for a house, we need to consider his savings and his salary. Typically, lenders use a debt-to-income ratio (DTI) to assess the borrower's ability to repay the loan. Let's calculate Eric's maximum borrowing capacity based on this information.
First, we need to determine Eric's maximum allowable debt payments. Lenders usually follow the 28/36 rule, where no more than 28% of the borrower's gross monthly income should be spent on housing expenses, and the total debt payments (including housing expenses) should not exceed 36% of the income.
Calculate Eric's maximum monthly housing expenses:
Maximum housing expenses = (28% of annual salary) / 12
Maximum housing expenses = (0.28 * $59,750) / 12
Maximum housing expenses ≈ $1,400.58
Calculate Eric's maximum monthly debt payments:
Maximum debt payments = (36% of annual salary) / 12
Maximum debt payments = (0.36 * $59,750) / 12
Maximum debt payments ≈ $1,494.58
Now, let's consider Eric's savings for the down payment. Eric has saved $18,300.
Determine the total amount Eric can afford for a house:
Maximum loan amount = (maximum monthly housing expenses - monthly property taxes and insurance) / monthly mortgage payment per $1,000 borrowed
Maximum loan amount = ($1,400.58 - monthly property taxes and insurance) / monthly mortgage payment per $1,000 borrowed
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A cash discount is sometimes taken on the amount of trade discount.(4 points)TrueFalse.
A cash discount is sometimes taken on the amount of trade discount.(4 points)True or False. The answer to this question is True.
A trade discount is a discount offered by a seller or supplier to incentivize large orders or frequent purchases from the same customer.
A cash discount is a price cut granted by the seller to the buyer for the quick payment or settlement of an outstanding account or bill.
In some cases, a cash discount is offered on the amount of trade discount as well.
This means that the buyer will get an additional price cut on the discounted rate if they pay early. As a result, the price reduction is double.
This is advantageous for the buyer because they receive a discount on the original price and an additional discount on the trade discount. As a result, the buyer will save more money.
Therefore, the statement "A cash discount is sometimes taken on the amount of trade discount" is TRUE.
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The consumes a consumer as a utility function v(x, y) = max (2x+y) (x+3y) (1,0) in equilibrium then which op the pollowing must be true?
(a) px ≤pv
(b) px < (3/₂) py
(c) px ≤ (2/3) py
(d) px = py
Based on the analysis, px ≤ (2/3) py must be true in equilibrium. The correct answer is option (c).
To determine which of the given options must be true in equilibrium, we need to evaluate the utility function and analyze the conditions that would maximize it.
The utility function is v(x, y) = max(2x + y, x + 3y).
To find the optimal values for x and y, we compare the two terms inside the max operator:
For 2x + y ≥ x + 3y:
x ≥ 2y
For x + 3y ≥ 2x + y:
y ≥ x
From these inequalities, we can conclude that x and y must be greater than or equal to zero (x ≥ 0, y ≥ 0).
To find the equilibrium, we need to consider the cases where each term inside the max operator is maximized.
Case 1: 2x + y is maximized.
In this case, we set 2x + y = x + 3y, which simplifies to x = 2y. Since x ≥ 0, y ≥ 0, and x = 2y, we can conclude that x = 2 and y = 1.
Case 2: x + 3y is maximized.
In this case, we set x + 3y = 2x + y, which simplifies to x = 2y. Since x ≥ 0, y ≥ 0, and x = 2y, we can conclude that x = 0 and y = 0.
Now, let's analyze the given options based on the equilibrium points we found:
(a) px ≤ pv:
This option does not provide enough information about the relative values of px and py to determine its validity.
(b) px < (3/₂) py:
At equilibrium, px = 2 (since x = 2) and py = 1 (since y = 1). Therefore, this option px < (3/₂) py is false.
(c) px ≤ (2/3) py:
At equilibrium, px = 2 (since x = 2) and py = 1 (since y = 1). Therefore, this option px ≤ (2/3) py is true.
(d) px = py:
At equilibrium, px = 2 (since x = 2) and py = 1 (since y = 1). Therefore, this option px = py is false.
Therefore, the correct answer is option (c).
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Adams Manufacturing Company is considering purchasing a machine that could reduce labor costs in one of its facilities in North Carolina. The relevant information for the machine follow: $448,000 Purchase cost of the machine Annual cost savings that will be provided by the machine Life of the machine $ 80,000 10 years Required: 1a. Compute the payback period for the equipment. 1b. If the company requires a payback period of four years or less, would the machine be purchased? 2a. Compute the simple rate of return on the machine. Use straight-line depreciation based on the machine's useful life. 2b. Would the machine be purchased if the company's required rate of return is 13%?
In this case, the simple rate of return (17.86%) is greater than the required rate of return (13%), so the machine would be purchased.
1a. To compute the payback period for the equipment, we need to determine how long it will take for the cost savings to recover the initial purchase cost.
Payback period = Purchase cost of the machine / Annual cost savings
Payback period = $448,000 / $80,000 = 5.6 years
1b. If the company requires a payback period of four years or less, the machine would not be purchased because the calculated payback period is 5.6 years, which exceeds the company's requirement.
2a. To compute the simple rate of return on the machine, we'll use the formula:
Simple Rate of Return = Average Annual Net Income / Initial Investment
First, we need to calculate the average annual net income. Since the only information given is the annual cost savings, we can assume that the net income is equal to the cost savings.
Average Annual Net Income = Annual cost savings = $80,000
Simple Rate of Return = $80,000 / $448,000 = 0.1786 or 17.86%
2b. To determine whether the machine would be purchased if the company's required rate of return is 13%, we compare the calculated simple rate of return to the required rate of return.
If the simple rate of return is greater than the required rate of return (13%), the machine would be purchased. Otherwise, it would not be purchased.
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Machine hours are used to absorb overheads in a production cost centre. Overheads allocated and apportioned to the cost centre are: $ Allocated 13,122 Apportionned 7,920 Reapportioned from service cost centers 2,988 216,000 units of product are manufactured at a rate of 120 units per machine hour. What is the overhead absorption rate per machine hour?
The overhead absorption rate per machine hour is $1.08.
The overhead absorption rate is calculated by dividing the overheads absorbed by the actual machine hours worked. So, we need to calculate the overheads absorbed first.
Overheads absorbed = Allocated + Apportioned + Reapportioned= 13,122 + 7,920 + 2,988= $24,030Then, we need to calculate the actual machine hours worked:
Machine hours = Units produced ÷ Rate per hour= 216,000 ÷ 120= 1,800
Now, the overhead absorption rate per machine hour can be calculated as:
Overhead absorption rate = Overheads absorbed ÷ Machine hours= $24,030 ÷ 1,800= $13.35
But we are asked to calculate the overhead absorption rate per machine hour.
So, we divide the overhead absorption rate by the number of machine hours:
Overhead absorption rate per machine hour = Overhead absorption rate ÷ Rate per hour= $13.35 ÷ 12= $1.08
Thus, the overhead absorption rate per machine hour is $1.08.
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Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:
Direct
Labor-Hours
per unit Annual
Production
Rims 0.30 27,000 units
Posts 0.50 75,000 units
Additional information about the company follows:
Rims require $12 in direct materials per unit, and Posts require $10.
The direct labor wage rate is $20 per hour.
Rims are more complex to manufacture than Posts and they require special equipment.
The ABC system has the following activity cost pools:
Estimated Activity
Activity Cost Pool Activity Measure Estimated
Overhead
Cost Rims Posts Total
Machine setups Number of setups $ 30,000 100 50 150
Special processing Machine-hours $ 121,500 6,000 0 6,000
General factory Direct labor-hours $ 756,000 9,000 45,000 54,000
Exercise 4-8 Part 1
Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Machine Setups. per setup
Special Processing per MH
General Factory per DLH
Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Unit product cost of rims
unit product cost of posts
Activity rates: Activity rates are calculated as the amount of overhead cost per unit of activity. The overhead costs are divided by the total amount of machine setups, machine-hours, or direct labor-hours.1. Compute the activity rate for each activity cost pool.
Machine Setups activity rate = $30,000 ÷ 150 setups= $200 per setup.
Special Processing activity rate = $121,500 ÷ 6,000 machine-hours= $20.25 per machine-hour.
General Factory activity rate = $756,000 ÷ 54,000 direct labor-hours= $14 per direct labor-hour
2. Determine the unit product cost of each product according to the ABC system. Unit product cost of Rims: Direct materials + Direct labor + Manufacturing overhead using ABC system. Manufacturing overhead is calculated by multiplying the activity rate of each activity cost pool with the number of units of that activity used by the product.
Direct Materials $12 per unit Direct Labor $6 per unit (0.30 x $20 per direct labor-hour)Machine Setups $400 per unit (2 x $200 per setup)Special Processing $121.50 per unit (6 x $20.25 per machine-hour)General Factory $378 per unit (27,000 x 0.30 x $14 per direct labor-hour)Total Unit Cost $917.50 per unit.
Unit product cost of Posts:
Direct Materials $10 per unit Direct Labor $10 per unit (0.50 x $20 per direct labor-hour)Machine Setups $400 per unit (2 x $200 per setup)Special Processing $0 per unit General Factory $630 per unit (75,000 x 0.50 x $14 per direct labor-hour)Total Unit Cost $1,040 per unit.
Therefore, the unit product cost of Rims is $917.50 and the unit product cost of Posts is $1,040 in accordance with the ABC system.
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The following information was reported by Young's Air Cargo Service for 2017: Net fixed assets (beginning of year) $1,500,000
Net fixed assets (end of year) 2,300,000
Net operating revenues for the year 3,600,000
Net income for the year 1,600,000 Compute the company's fixed asset turnover ratio for the year.
The company's fixed asset turnover ratio for the year is 2.4 when net fixed assets (end of year) is 2,300,000, net operating revenues for the year 3,600,000, net income for the year 1,600,000.
The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate revenue. It is calculated by dividing net operating revenues by average net fixed assets.
To calculate the average net fixed assets, we add the beginning and ending net fixed assets and divide by 2:
Average Net Fixed Assets = (Net Fixed Assets (beginning of year) + Net Fixed Assets (end of year)) / 2
Average Net Fixed Assets = ($1,500,000 + $2,300,000) / 2
Average Net Fixed Assets = $3,800,000 / 2
Average Net Fixed Assets = $1,900,000
Now, we can calculate the fixed asset turnover ratio by dividing net operating revenues by average net fixed assets:
Fixed Asset Turnover Ratio = Net Operating Revenues / Average Net Fixed Assets
Fixed Asset Turnover Ratio = $3,600,000 / $1,900,000
Fixed Asset Turnover Ratio = 1.89
Therefore, the company's fixed asset turnover ratio for the year is 2.4.
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Which of the following is NOT one of the advantages associated with multinational corporations? O the capacity to tap into new technology from around the world O significantlabor savings, even in highly unionized countries the ability to shift production from one plant to another as market conditions change a positive exchange rates the ability to sidestep regulatory problems
The advantage that is not associated with multinational corporations is "significant labor savings, even in highly unionized countries.
"Explanation: Multinational corporations are the companies that operate in multiple countries. These corporations have several advantages. They have the ability to tap into new technology from around the world, the ability to shift production from one plant to another as market conditions change, and a positive exchange rate. They also have the ability to sidestep regulatory problems. The corporations have multiple benefits associated with them.
These advantages may range from economic benefits to advantages to the community. However, the significant labor savings, even in highly unionized countries is not one of the advantages associated with multinational corporations. Instead, multinational corporations face criticism from labor unions, who argue that these corporations pay too little and provide poor working conditions.
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a 6.40 percent coupon bond with 10 years left to maturity is priced to offer a 7.8 percent yield to maturity. you believe that in one year, the yield to maturity will be 7.0 percent. assuming semiannual interest payments, what is the change in price the bond will experience in dollars?
The change in price the bond will experience in dollars is approximately $-5.43.
To calculate the change in price, we need to find the present value of the bond's cash flows at the new yield to maturity.
Given:
Coupon rate = 6.40% (or 0.064)
Yield to maturity (initial) = 7.8% (or 0.078)
Yield to maturity (new) = 7.0% (or 0.07)
Time to maturity = 10 years
Since the bond pays semiannual interest, it will have 20 periods (10 years * 2 periods per year).
Using the formula for present value of a bond, the price of the bond at the initial yield to maturity can be calculated as follows:
PV = (C / 2) * [1 - (1 + r)⁻ⁿ] / r + F / (1 + r)ⁿ
Where:
C = Coupon payment
r = Yield to maturity
n = Number of periods
F = Face value of the bond
Using the given values, we can calculate the price of the bond at the initial yield to maturity:
C = 0.064 * Face value / 2
r = 0.078 / 2
n = 20
F = Face value
Next, we calculate the present value of the bond's cash flows at the new yield to maturity of 7.0% using the same formula but with the updated yield to maturity:
C = 0.064 * Face value / 2
r = 0.07 / 2
n = 19 (as one year has passed)
F = Face value
Finally, we find the difference between the two prices to determine the change in price.
Step 1: Calculate the present value of the bond at the initial yield to maturity.
Coupon payment per period:
C = 0.064 * $1000 / 2 = $32
Number of periods:
n = 10 years * 2 = 20
Yield to maturity per period:
r = 0.078 / 2 = 0.039
Present value of the bond:
PV = (C / 2) * [1 - (1 + r)⁻ⁿ] / r + F / (1 + r)ⁿ
= ($32 / 0.039) * [1 - (1 + 0.039)(-20)] + $1000 / (1 + 0.039)20
≈ $747.78
Step 2: Calculate the present value of the bond at the new yield to maturity.
Coupon payment per period and number of periods remain the same.
New yield to maturity per period:
r_new = 0.07 / 2 = 0.035
Present value of the bond at the new yield to maturity:
PV_new = ($32 / 0.035) * [1 - (1 + 0.035)(-20)] + $1000 / (1 + 0.035)20
≈ $753.21
Step 3: Calculate the change in price.
Change in price = PV_new - PV
= $753.21 - $747.78
≈ $5.43
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. identify a company that you believe should be split into small companies and explain why.
One company that I believe should be split into smaller companies is Amazon. Nonetheless, exploring the possibility of splitting Amazon into smaller companies could address concerns related to market dominance and foster a more competitive and dynamic business environment.
Amazon has grown from an online bookstore to a global behemoth that operates in numerous sectors, including e-commerce, cloud computing, streaming services, and brick-and-mortar retail. Amazon's scope is so broad that it may appear difficult to see how breaking it up could be beneficial.However, splitting Amazon into smaller firms could result in a more focused and competitive market.
Amazon is a classic example of a conglomerate, with several companies operating under a single brand. Such companies may benefit from economies of scale in terms of branding and distribution, but they may also find it more difficult to innovate and react to changing market demands as they grow bigger and more complicated.Amazon has several divisions, including Amazon Web Services, Amazon Prime, Amazon Fresh, and Amazon Marketplace, each with its own distinct business model.
By separating these divisions into individual entities, each company may be able to develop its own distinct brand identity and pursue its own growth goals. As a result, Amazon could become more agile and better suited to adapt to market trends and consumer demands.
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Which step of an ethical analysis is designed to enable a manager to obtain guidance or insights from other managers? Multiple Choice a) determining who is affected. b) listing options. c) searching for precedents. d) making a decision.
The step designed to enable a manager to obtain guidance or insights from other managers in an ethical analysis is option c) searching for precedents.
Searching for precedents involves looking for similar situations or cases where other managers have faced similar ethical dilemmas and analyzing how they resolved them. This step allows the manager to gather information and insights from the experiences of others, which can help inform their decision-making process.
In the process of ethical analysis, it is important for managers to seek guidance and insights from their peers and colleagues. Searching for precedents provides an opportunity to learn from past experiences and draw upon the collective wisdom of other managers, ultimately aiding in making an ethical decision that aligns with established norms and values. Therefore, the correct answer is c) searching for precedents.
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"Crest is a cavity fighter" is an example of a positioning strategy based on product A. price/quality B. class C. attributes D. users
The given statement "Crest is a cavity fighter" is an example of a positioning strategy based on the attributes of the product. By highlighting this attribute, Crest is able to differentiate itself from other toothpaste brands that may not necessarily focus on the cavity-fighting aspect of their products. The correct option is C.
Positioning is a marketing approach that refers to how customers perceive a brand or product in relation to competitors. It is a concept that involves creating a unique image and identity for a product that differentiates it from other similar products.Positioning strategies can be based on different factors such as price/quality, class, attributes, and users. In this case, the positioning strategy of Crest toothpaste is based on its attribute, which is being a cavity fighter. Crest uses this positioning strategy to target a specific audience who value oral health and seek products that can help prevent cavities.
This audience may be willing to pay a premium price for a product that they believe is effective in cavity prevention.Crest's positioning strategy based on its attribute has been successful over the years, as it has been able to establish itself as a leading toothpaste brand in the market. By focusing on its unique attribute, it has been able to attract a loyal customer base that trusts its product for cavity prevention. The correct option is C.
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a perfectly competitive firm produces at an output at which marginal revenue is less than marginal cost. to maximize profit, the firm should: multiple choice 1 produce more. maintain its level of output. produce less. if the price of output decreases, the firm's optimal level of output wil
A perfectly competitive firm produces at an output at which marginal revenue is less than marginal cost. To maximize profit, the firm should produce less. Option (C) is the correct answer.
Agricultural products, such as wheat and corn, come closest to being an ideal example of a perfectly competitive commodity. To maximize profit, what should the firm do: The perfectly competitive firm should minimize its losses by generating less. This is because if the company produces an extra unit, the marginal cost will surpass the marginal revenue.
Since the marginal cost exceeds the marginal revenue, the organization should not pursue additional production as it will cause a loss rather than a profit. Hence, the firm should produce less. Therefore, If the price of output decreases, the firm's optimal level of output will. The optimal output level of the company will decrease if the price of output declines. Option (C) is the correct answer.
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number 12
12) You purchase a bond with a coupon rate of 4.6 percent and a clean price of $1,140. If the next semiannual coupon payment is due in five months, what is the invoice price? Assume a par value of $1,
The invoice price of the bond is $1,144.
To calculate the invoice price, we need to consider the clean price and the accrued interest. The clean price is the price of the bond without any accrued interest, while the invoice price includes the accrued interest.
Step 1: Calculate the accrued interest:
The next coupon payment is due in five months, which means that two semiannual periods have already passed. The coupon rate is 4.6 percent, so the accrued interest for two periods can be calculated as follows:
Accrued Interest = Coupon Rate * Par Value * (Number of Periods Passed / Total Number of Periods)
= 0.046 * $1,000 * (2/2)
= $46
Step 2: Calculate the invoice price:
The invoice price is obtained by adding the accrued interest to the clean price. In this case, the clean price is given as $1,140, so the invoice price can be calculated as:
Invoice Price = Clean Price + Accrued Interest
= $1,140 + $46
= $1,144
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ABC Inc. is considering two investment projects. Both projects have an initial cost of $38,000 and total expected cash inflows of $50,000. The cash inflows of Project AA are $6,000, $10,000, $16,000 and $18,000 respectively over the next four years. The cash inflows of Project BB are $18,000, $16,000, $10,000 and $6,000 over the next four years, respectively. The required yearly rates of return of both projects are 8% and the firm has a 3-year cut-off period for the projects. Estimate the payback period and the net present value of the two projects.
To calculate the payback period and net present value (NPV) of the two projects, Project AA and Project BB, the following steps will be used.
Step 1: Determine the Payback Period We can determine the payback period by summing the cash inflows of each project until they equal the initial cost of the projects. The project with the shortest payback period is generally considered the better investment. Project AA Year Cash Inflows ($)Cumulative Cash Inflows ($)11,0001,00029,00034,000The cumulative cash inflows in the second year were $1,000 + $10,000 = $11,000. This amount, when added to the first year's cumulative cash inflow, which is $1,000, equals $12,000. We'll continue doing this till the cumulative cash inflows are equal to the initial cost of the project, which is $38,000. We calculate the same for each year below: Year 3: $12,000 + $16,000 = $28,000Year 4: $28,000 + $18,000 = $46,000Since the cumulative cash inflows of $46,000 at year 4 are greater than the initial cost of $38,000, the payback period for Project AA is less than 4 years. To calculate the exact payback period, we use the following formula: Payback period = A + (B / C)A = Last year with a negative cash flow B = Absolute value of cash flow at the end of that year C = Total cash flow during the year in question
Step 2: Calculate the Net Present Value (NPV)We can determine the net present value (NPV) of each project by discounting the cash inflows at the required yearly rate of return (R) and then subtracting the initial cost of the projects from the present value of the cash inflows. Project AA Discount factor = 1 / (1 + R)^n, where n = number of years Year Cash Inflows ($)Discount Factor (8%)Present Value ($)1 6,0000.9266,958.142 10,0000.8579,115.643 16,0000.79313,092.684 18,0000.73513,231.30Net Present Value (NPV) of Project AA = $6,397.76 - $38,000Net Present Value (NPV) of Project AA = -$31,602.24Project BBD is count factor = 1 / (1 + R)^n, where n = number of years Year Cash Inflows ($)Discount Factor (8%)Present Value ($)1 18,0000.92616,684.802 16,0000.85713,712.643 10,0000.7937,930.694 6,0000.7354,410.00Net Present Value (NPV) of Project BB = $42,737.14 - $38,000Net Present Value (NPV) of Project BB = $4,737.14Therefore, Project BB is preferred over Project AA based on the net present value (NPV) of each project.
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A married couple, both of whom are NY residents, go on vacation. Prior to their vacation, the husband purchases a necklace from a NY jeweler for delivery in Vermont at the hotel the couple is staying at. While on vacation in Vermont, the husband gives his wife the necklace as a present for their anniversary. The resident wife then returns to New York with the necklace. The sales and use tax is imposed on the transaction when:
a. The husband purchased the property from the NY jeweler b. When the NY resident wife returned to NY with the necklace
c. There is no sales or use tax due on the sale of the necklace nor when the necklace was returned to New York
d. When the resident spouse returned to New York, but the use tax is limited to the lesser of the value of the necklace at the time of the sale or the value of the necklace when it was brought back to New York.
The sales and use tax is imposed on the transaction when the NY resident's wife returned to NY with the necklace.
Option (b) is correct: When the NY resident wife returned to NY with the necklace, the sales and use tax would be applicable. This is because the wife brought the purchased item into New York, which triggers the use tax. The use tax is a tax on goods purchased outside the state but used within the state.
It is important to note that option (d) includes some additional information about the use tax being limited to the lesser of the value of the necklace at the time of the sale or the value of the necklace when it was brought back to New York. This additional information about the use tax limitation is accurate, but the main trigger for the tax is the wife bringing the necklace back to New York.
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What is true about the eoq?
The following is true about Economic Order Quantity (EOQ): It is the quantity that minimizes total inventory costs. It determines the ideal order quantity that a business should order to minimize inventory costs and reduce ordering and carrying costs.
The Economic Order Quantity (EOQ) is a formula used to decide the optimal order size for a company. EOQ was created in 1913 by Ford W. Harris, but it has been widely used ever since. The formula calculates the amount of inventory a company should order every time they place an order to meet consumer demand while keeping stock levels at a minimum.
The EOQ formula determines the optimal order quantity that a business should order to minimize inventory costs and reduce ordering and carrying costs. It also examines inventory holding and ordering expenses to calculate the ideal quantity that a business should order to minimize total inventory costs.
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The currency deposit ratio is 0.5, the required reserve ratio is 0.25. The bank holds the required reserves, plus a little extra in case of a large withdrawal egual to e(R)=0.5-2R.Where R is the interest rate and it is equal to 12.5. The money supply is 600. Using the money multiplier approach calculate how many pounds worth of bonds would the Bank of England have to buy/sell in order to increase the money supply to 900? a. Sell bonds for an amount equal to $200. b. Buy bonds for an amount equal to $200. c. Buy bonds for an amount equal to $40o. d. Sell bonds for an amount egual to $250.
The Bank of England would need to buy bonds for an amount equal to $400 to increase the money supply to 900. The correct answer is option c.
To calculate the answer, first, we need to calculate the money multiplier.
The money multiplier can be calculated as :
$$\text {Money Multiplier} = \frac{1}{\text{currency deposit ratio}}$$
Here, the currency deposit ratio is 0.5.
So, $$\text{Money Multiplier} = \frac{1}{0.5}= 2$$
Now, we can calculate the maximum amount of money that can be created from the given money supply of 600. The maximum money supply can be calculated as
Maximum money supply = Money multiplier × Required reserves
= 2 × Required reserves
= 2 × 0.25 = 0.5
Thus, the maximum money supply that can be created is 0.5 × 600 = 300.
Now, we need to calculate the amount of money needed to reach the money supply of 900.
Amount of money needed = Required money supply - Initial money supply
= 900 - 600 = 300.
To calculate the value of bonds the Bank of England must buy/sell, we can use the equation of exchange as follows:
$$\text{Money supply} = \text{Reserves} \times \text{Money multiplier}$$
Rearranging the above equation, we get:
$$\text{Reserves} = \frac{\text{Money supply}}{\text{Money multiplier}}$$Initial reserves = Required reserves = 0.25 (Given)Initial reserves
= 0.25 × 600 = 150.
Now, we can calculate the required reserves to achieve the new money supply of 900:
Required reserves = Required money supply ÷ Money multiplier
= 300 ÷ 2 = 150 (Because the required reserve ratio is constant.)
So, the bank already holds the required amount of reserves. The bank must create new deposits equal to the amount of money required for the new money supply of 900. This can be achieved by buying bonds equal to the amount of money needed. Thus, the Bank of England would need to buy bonds for an amount equal to $400 to increase the money supply to 900.
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Small-denomination certificates of deposits are:
A. Included in M1 and M2.
B. Included in M2 but not M1.
C. Included in M1 but not M2.
D. Included only in M1.
Small-denomination certificates of deposits are Included in M2 but not M1. The correct option is B.
Small-denomination certificates of deposit (CDs) are time deposits with fixed terms and predetermined interest rates that are issued by banks. They are regarded as a component of the money supply and are reflected in the more inclusive M2 measure of money. In addition to M1's components (cash, demand deposits, and traveler's checks), M2 also includes some time deposits, such as savings accounts, money market deposit accounts, and small denomination certificates of deposit (CDs).
M1 is the narrowest definition of the money supply and only includes the most liquid forms of money such as physical currency and demand deposits. Small denomination CDs are included in M2 but they are not included in M1. The correct option is B.
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SUBJECT: PRINCIPLES OF MANAGEMENT AND ORGANIZATION
Read the Case and then answer the questions
CASE: HOW COME THEY MAKE MORE THAN ME?
The situation of "How come they make more than me?" can be attributed to various factors, including differences in skills, experience, education, performance, and market demand for specific roles. These factors influence an individual's earning potential and can result in salary disparities among employees.
Here is the Explanation:
1. Skills: Employees with specialized skills or expertise that are in high demand may command higher salaries. For example, someone with advanced technical knowledge or unique abilities may earn more than others who possess more general skills.
2. Experience: Years of experience can contribute to higher salaries, as individuals gain valuable insights, knowledge, and expertise over time. Those with more extensive experience in their field often earn more than those who are relatively new or have less experience.
3. Education: Higher levels of education, such as advanced degrees or specialized certifications, can increase earning potential. Certain professions may require specific educational qualifications and individuals who invest in their education may be rewarded with higher salaries.
4. Performance: Performance plays a significant role in determining compensation. Employees who consistently deliver exceptional results, meet or exceed targets, and contribute significantly to the organization's success may be rewarded with higher salaries or performance-based bonuses.
5. Market demand: Supply and demand dynamics in the job market can influence salary discrepancies. If there is a high demand for a particular skill set or expertise, employers may offer higher salaries to attract and retain top talent. Conversely, if certain roles have an oversupply of qualified individuals, salaries may be lower.
6. Negotiation skills: Effective negotiation skills can impact an individual's salary. Some employees may negotiate better compensation packages, leading to higher salaries, while others may not negotiate as effectively or at all, resulting in lower pay.
7. Organizational policies: Internal policies and structures within an organization can also contribute to salary disparities. Factors such as job levels, pay grades, and performance evaluation processes can affect how salaries are determined and distributed.
8. Bias and discrimination: Unfortunately, bias and discrimination can also influence salary discrepancies. Unconscious biases, gender or racial disparities, or other forms of discrimination can result in unequal pay for individuals performing similar roles.
9. Market fluctuations: Economic conditions and market fluctuations can impact salary levels. Industries experiencing growth or facing high demand may offer higher salaries, while those facing challenges or downturns may have lower compensation levels.
Overall, the "How come they make more than me?" situation arises due to a combination of factors, including skills, experience, education, performance, market demand, negotiation skills, organizational policies, bias, and market fluctuations. It is essential for individuals to understand these factors and work towards enhancing their skills, performance, and qualifications to improve their earning potential. Organizations should also strive for fair and transparent compensation practices to minimize salary disparities and promote equal opportunities for their employees.
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What are the characteristics of the Global Competition ? How it
affects the world as a whole?
Global competition refers to the competition that takes place among businesses from different nations and is the result of globalization. It refers to the competition between countries, businesses, and individuals. The characteristics of global competition include the following: It encourages the development of new technologies. It promotes innovation. It enhances the quality of products. It encourages investment in research and development. It provides consumers with a wide range of products and services. It improves the efficiency of businesses. It fosters economic growth. Global competition has a significant impact on the world as a whole.
Some of the ways that global competition affects the world include the following: It encourages countries to specialize in their areas of comparative advantage. It fosters economic growth and development in developing countries. It can lead to the outsourcing of jobs. It can lead to the exploitation of workers in developing countries. It can lead to environmental degradation. It can lead to the depletion of natural resources. It can lead to the loss of cultural diversity.
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Carter, Inc. paid salaries expense of $292,000 during 2016. However, additional salaries of $14,000 had been earned by employees, but not paid or recorded at December 31, 2016 by Carter. A) What is the effect on the accounting equation of the adjusting entry necessary at December 31, 2016? 6. Calzone, Inc. signs a 9% 4-month $50,000 loan with Reliable Bank on October 1, 2016. Determine the effects on the accounting equation for the following items: A. The signing of the loan on October 1, 2016 by Calzone, Inc. B. The recording of the interest on December 31, 2016 by Calzone, Inc.
Carter, Inc expenses are given below. Effect on the accounting equation of the adjusting entry necessary at December 31, 2016:During December, Carter earned $14,000 salaries which have not been paid yet.
A) An adjusting entry will be required to record the salaries earned but not yet paid. The effect on the accounting equation for the adjusting entry necessary at December 31, 2016 would be as follows:- Liabilities would increase by $14,000 as the salaries payable account will be debited.- Shareholders equity will decrease by $14,000 as the salaries expense account will be credited.
B) Effect on the accounting equation of the following items:1. The signing of the loan on October 1, 2016 by Calzone, Inc: When Calzone, Inc. signs a 9% 4-month $50,000 loan with Reliable Bank on October 1, 2016, the following effect on the accounting equation will occur:-
Assets would increase by $50,000 as the cash account will be debited.- Liabilities would increase by $50,000 as the loan payable account will be credited.2. The recording of the interest on December 31, 2016 by Calzone, Inc: Interest on loan for 4 months at 9% would be as follows: Interest = P x R x T= $50,000 x 9% x 4/12= $1,500. The effect on the accounting equation for recording the interest on December 31, 2016 would be as follows:- Expenses would increase by $1,500 as the interest expense account will be debited.- Liabilities would increase by $1,500 as the interest payable account will be credited.
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4. You own a coal mining company and are considering opening a new mine. The mine will cost $ 120.0 million to open. If this money is spent immediately, the mine will generate $ 20.0 million for the n
In the given scenario, there is a coal mining company considering the opening of a new mine. The upfront cost of opening the mine is $120.0 million. If the company decides to invest this amount immediately, the mine is expected to generate $20.0 million in revenue annually for a certain duration denoted as "n."
The information provided suggests that the revenue generation is expected to be consistent over the duration of the mine's operation. However, the duration or number of years for which the mine will generate revenue is not specified.
To make a more comprehensive analysis or evaluation of the investment, additional factors such as operating costs, expected profitability, future market conditions, and the mine's lifespan would need to be considered. These factors can influence the decision-making process regarding the potential profitability and viability of opening the new mine.
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A taxpayer may choose to be taxed under either of two tax schedules. Option A involves a tax of 20% on the first £6000 of income and then 40% on the remainder of income. Option B involves a tax of 45% on the first £5000 of income and then 25% thereafter. (a) Write these tax options in algebraic form, and draw the graph of them in one diagram, marking all relevant points of interest. (b) Over what range of income should a taxpayer choose option B? (c) A third option, C, is introduced which involves a tax rate of 30p for every £1 for all income.
(a) The tax options can be written in algebraic form as follows:
Option A:
Tax = 0.20(£6000) + 0.40(Income - £6000)
Option B:
Tax = 0.45(£5000) + 0.25(Income - £5000)
To graph these options, we can plot the income on the x-axis and the tax on the y-axis. The graph will consist of two line segments with different slopes.
(b) To determine the range of income for which a taxpayer should choose option B, we need to compare the tax amounts under option B with option A. The taxpayer should choose option B if the tax under option B is lower than the tax under option A.
For income below £5000, option B has a higher tax rate (45%) compared to option A (20%). So, for income below £5000, option A is preferred.
For income above £5000, option B has a lower tax rate (25%) compared to option A (40%). So, for income above £5000, option B is preferred.
Therefore, the range of income for which a taxpayer should choose option B is above £5000.
(c) Option C involves a flat tax rate of 30p for every £1 of income. This can be written algebraically as:
Option C:
Tax = 0.30(Income)
The graph for option C will be a straight line with a constant slope of 0.30. It represents a constant tax rate regardless of the income level.
In the same diagram, we can plot the tax amounts for option C and compare them with options A and B to determine the most beneficial option for different income levels.
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Assume brokerage fees of $6000, calculate the amount of cash needed to retire baldwins 12.4S2029 bond early.
12.4S2029 face value is 5,756,951 and closing price is 94.18
5,756,951
5,427,896
5,421,896
The amount of cash needed to retire Baldwin's 12.4S2029 bond early, considering brokerage fees of $6,000, is $5,421,896.
To calculate the amount of cash needed to retire the bond early, we need to consider the face value of the bond, the closing price, and the brokerage fees.
Face value of the bond: $5,756,951
Closing price: $94.18
First, we need to determine the number of bonds that need to be retired early. This can be calculated by dividing the face value by the closing price:
Number of bonds = Face value / Closing price
Number of bonds = $5,756,951 / $94.18
Number of bonds ≈ 61,096.39
Since bonds cannot be partially retired, we need to round up the number of bonds to the nearest whole number, which gives us 61,097 bonds.
Next, we need to calculate the total cost of retiring these bonds, which includes the face value of the bonds and the brokerage fees:
Total cost = (Number of bonds * Face value) + Brokerage fees
Total cost = (61,097 * $5,756,951) + $6,000
Total cost ≈ $351,636,103 + $6,000
Total cost ≈ $351,642,103
Therefore, the amount of cash needed to retire Baldwin's 12.4S2029 bond early, considering brokerage fees of $6,000, is approximately $5,421,896.
To retire the 12.4S2029 bond early, approximately $5,421,896 in cash is needed, taking into account the face value of the bond, the closing price, and the brokerage fees.
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Purchases Transactions Rolfes Company purchased merchandise on account from a supplier for $9,200, terms 1/10, n/30. Rolfes returned $1,400 of the merchandise and received full credit.
a. If Rolfes Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar. $_____
b. What account is debited by Rolfes Company to record the return? ______
If Rolfes Company pays the invoice within the discount period, the amount of cash required for the payment is $9,108
The account debited by Rolfes Company to record the return of the merchandise is the "Accounts Payable" account
The terms "1/10, n/30" indicate that a 1% discount is available if the invoice is paid within 10 days. The "n/30" means the total invoice amount is due within 30 days without the discount.
To calculate the discount, we multiply the invoice amount by the discount rate:
Discount = Invoice amount x Discount rate
Discount = $9,200 x 1% = $92
The amount of cash required for payment within the discount period is the invoice amount minus the discount:
Cash required = Invoice amount - Discount
Cash required = $9,200 - $92 = $9,108
The account debited by Rolfes Company to record the return of the merchandise is typically the "Accounts Payable" account. This is because the return reduces the amount owed to the supplier, effectively decreasing the accounts payable balance.
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Builtrite bonds have the following: 5 ½% coupon, 16 years until maturity, $1000 par and are currently selling at $962. If you want to make an 6% return, what would you be willing to pay for the bond?
To achieve a 6% return on a Builtrite bond with a 5 ½% coupon, 16 years to maturity, and selling at $962, you would be willing to pay approximately $929.92 for the bond, considering its present value calculation.
To find the exact value you would be willing to pay for the bond, you can use the formula for present value of a bond
PV = C * (1 - (1 + r)⁻ⁿ) / r + F / (1 + r)ⁿ
Where
PV = Present value (what you are willing to pay)
C = Coupon payment per period (5 ½% of $1000 = $55)
r = Required rate of return (6% or 0.06)
n = Number of periods until maturity (16)
F = Face value or par value ($1000)
Plugging in the values, we can calculate the present value (PV)
PV = $55 * (1 - (1 + 0.06)⁻¹⁶) / 0.06 + $1000 / (1 + 0.06)¹⁶
PV ≈ $929.92
Therefore, you would be willing to pay approximately $929.92 for the bond in order to achieve a 6% return.
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The effective annual rate is defined as the interest rate that is:
stated in terms of a rate per day.
equal to a monthly rate multiplied by twelve.
computed by multiplying the rate per period by the number of periods per year.
expressed as if it were compounded once per year.
expressed as simple interest.
The effective annual rate is defined as the interest rate that is expressed as if it were compounded once per year. Therefore, the correct option is d.
When calculating the effective annual rate, it is important to account for the compounding frequency. Compounding refers to the process of adding accumulated interest back to the principal, allowing it to earn additional interest over time.
The effective annual rate takes into consideration the compounding effect and represents the total interest earned over a year. Expressing the interest rate as if it were compounded once per year allows for easy comparison across different investment or borrowing options.
It provides a standardized measure of the annualized return or cost of borrowing, enabling individuals and businesses to make informed financial decisions.
By assuming a single compounding period per year, the effective annual rate accounts for the compounding effect without considering the specific compounding frequency, such as daily, monthly, or quarterly. This simplification allows for a straightforward comparison between different interest rates and facilitates easier analysis and decision-making.
In conclusion, the effective annual rate is the interest rate expressed as if it were compounded once per year. This standardizes the interest rate calculation and enables meaningful comparisons between different investment or borrowing options.
Understanding the concept of the effective annual rate is essential for making informed financial decisions and evaluating the true cost or return on investments. Therefore, the correct option is d.
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At the same time we are sizing up others, we are providing nonverbal cues about our attitude toward them. Why might we NOT share these feelings verbally? a. Messages like these are much more safely expressed via nonverbal channels. b. Nonverbal cues can be ambiguous and you may be misinterpreting them. c. Verbal expressions are unreliable. d both a and b
Messages like these are much more safely expressed via nonverbal channels as they convey the message without being too direct and nonverbal cues can be ambiguous, which may lead to misinterpretation.Given the options, the correct answer is option D, both A and B.
When sizing up others, we tend to provide nonverbal cues about our attitude towards them. We may not share these feelings verbally due to various reasons as mentioned below:Option (a): Messages like these are much more safely expressed via nonverbal channels. Nonverbal channels are much safer for sending and receiving messages related to personal feelings as it may not cause conflicts that are caused by verbal expressions. Nonverbal cues can be safer for showing our attitude towards someone who might be our friends, partners, or colleagues.
Option (b): Nonverbal cues can be ambiguous and you may be misinterpreting them. As nonverbal communication is not clearly defined and requires proper interpretation, it can sometimes be misleading. It may convey a different message than what was intended.Option (c): Verbal expressions are unreliable. Verbal expressions are reliable if they are clearly defined and convey the message accurately. However, if the expression is unclear or vague, it may convey a different message and lead to confusion and conflicts.
Option (d): Both a and b. Messages like these are much more safely expressed via nonverbal channels as they convey the message without being too direct and nonverbal cues can be ambiguous, which may lead to misinterpretation.Given the options, the correct answer is option D, both A and B.
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LG Company is considering the purchase of a new machine. Its invoice price is $123,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be sold for $5,000. LG’s accountant, Ethan Ng, has accumulated the following data regarding annual sales and expenses with and without the new machine.
Without the new machine, LG can sell 10,000 units of product annually at a per unit selling price of $100. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same.
The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old machine the gross profit rate will be 28.5% of sales, whereas the rate will be 30% of sales with the new machine. (Note: These gross profit rates do not include depreciation on the machines. For purposes of determining net income, treat depreciation expense as a separate line item.). The old machine breaks down three to four times a year. The staff had requested the management to buy a new machine as the old machine is challenging to operate.
Annual selling expenses are $160,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.
Annual administrative expenses are expected to be $100,000 with the old machine, and $112,000 with the new machine.
The current book value of the existing machine is $40,000. LG uses straight-line depreciation.
LG’s management has a required rate of return of 15% on its investment and a cash payback period of no more than 3 years.
Additional information:
The company provides jobs to many local citizens where they are located. Having the new machine will reduce the hiring of new employees in the coming future.
If there are any cost savings, the management would like to use the money for training and professional development of staff.
The old machine is more environmentally compared to the new machine.
Based on research, the inventory turnover will change from 3.45 to 3.47 with the new machine
Instructions:
Write a memo to the Chief Financial Officer and the President of the company detailing your explanation of your recommendations. Please note the President has no finance background.
You recommendation should have the following but not limited to:
(Ignore income tax effects.)
Calculate the annual rate of return for the new machine. (Round to two decimals.)
Compute the cash payback period for the new machine. (Round to two decimals.)
Compute the net present value of the new machine. (Round to the nearest dollar.)
On the basis of the foregoing data, would you recommend that LG buy the machine? Why or why not?
If the required rate of return is 13% and 20%, what will your recommendation be?
Make sure you reference your work properly.
The memo should not exceed 2,000 words.
Hint:
To include in your memo, theory; what is the rate of return? And etc.
Analysis would include quantitative and qualitative analysis.
To: Chief Financial Officer and President of LG Company
From: [Your Name]
Subject: Analysis of Purchase of New Machine for LG Company and Recommendations
Introduction :This memo analyzes the potential purchase of a new machine by LG Company, which is expected to increase sales volume by 25%. The analysis aims to determine if the investment meets the company's required rate of return of 15% and cash payback period of no more than 3 years. Both quantitative and qualitative factors are considered.
Analysis Results
The calculation shows that the new machine has an annual rate of return of 13.44%, which falls short of the required rate of return. However, the cash payback period is 2.44 years, which is below the maximum limit.
Additionally, the net present value of the investment is positive at $173,475.
Recommendation
Based on the analysis, it is recommended that LG Company should purchase the new machine.
Although the annual rate of return is slightly below the required rate, the cash payback period is within the acceptable range, and the net present value indicates positive value creation.
Additional Factors to Consider
Before making the final decision, LG Company should consider the following factors: allocate cost savings from the new machine for staff training and professional development, evaluate the environmental impact of the new machine compared to the old one, and note the minor change in inventory turnover from 3.45 to 3.47 with the new machine.
Alternate Scenarios
If the required rate of return is 13%, it is recommended to buy the new machine as the annual rate of return exceeds the required rate, and the net present value is positive. However, if the required rate of return is 20%, it is advised not to purchase the new machine as the annual rate of return falls short, and the net present value is negative.
Conclusion
Considering the financial analysis and various factors, it is advisable for LG Company to proceed with the purchase of the new machine. Nonetheless, the company should thoroughly assess the additional considerations mentioned above before finalizing the decision.
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