Answer: b. $3,000
Explanation:
The company's bad debt for the current year is said to be 1% of the credit sales because this is the usual rate for the past periods.
The bad debt expense for this year is therefore:
= Bad debt percentage * Credit sales
= 1% * 300,000
= $3,000
This will then be posted to the Allowance for Doubtful Accounts.
Dilts Company has a unit selling price of $400, unit variable costs of $250, and fixed costs of $210,000. Compute the break-even point in units using (a) the mathematical equation and (b) unit contribution margin.
Answer:
(a) Break-even point in units using the mathematical equation = 1,400 units
(b) Break-even point in units using unit contribution margin = 1,400 units
Explanation:
(a) Break-even point in units using the mathematical equation
Break-even point in units using the mathematical equation = Fixed costs / (Unit selling price - Unit variable costs) …………….. (1)
Substituting the relevant values into equation (1), we have:
Break-even point in units using the mathematical equation = $210,000 / ($400 - $250) = 1,400 units
(b) Break-even point in units using unit contribution margin
Unit contribution margin = Unit selling price - Unit variable costs = $400 - $250 = $150
Therefore, we have:
Break-even point in units using unit contribution margin = Fixed costs / Unit contribution margin = = $210,000 / $50 = 1,400 units
Which one of the following statements is correct? Both partnerships and corporations incur double taxation. Sole proprietorships and partnerships are taxed in a similar fashion. Partnerships are the most complicated type of business to form. Both partnerships and corporations have limited liability for general partners and shareholders. All types of business formations have limited lives.
Answer:
sole proprietorships and partnerships are taxed in a similar fashion
Explanation:
A tax can be regarded as compulsory financial charge, it can also be regarded as other type of levy that is been imposed on a taxpayer by a governmental organization so that funds needed to fund government spending as well as various public expenditures can be generated. This applies to sole proprietorship which is regarded as , is a type of enterprise that is been owned as well as run by one person. Also applies to partnership which can be regarded as formal arrangement set up between two or more parties so they can manage and operate a particular business as well as sharing of its profits. It should be noted that sole proprietorships and partnerships are taxed in a similar fashion
Complete the following statements with one of the terms listed here. You may use a term more than once. Some terms may not be used at all. Capital turnover Direct fixed expenses Flexible budget variance Key performance indictors (KPIs) Profit center Sales margin Common fixed expenses Favorable variance Goal congruence Management by exception Return on investment (ROI) Unfavorable variance Cost center Flexible budget Investment center Master budget variance Revenue center Volume variance
Solution :
a). Flexible budget
A flexible budget is a budget that is prepared for the different volume level which was originally anticipated.
b). Flexible budget variance
It is the different between the flexible budget and the actual results.
c). Return on Investment
It is used to evaluate the performance of the investment centers. It is calculated by dividing operating income by the investment.
d). Favorable variance
The company has the favorable variance when the actual values are more than the budgeted values.
Allied Co has cumulative preferred stock with a $100 par value and a 12 percent annual dividend. No dividend has been paid for the past two years. What must the preferred stockholders be paid prior to paying the common stockholders
Answer:
Allied Co.
The amount that must be paid to the preferred stockholders prior to paying the common stockholders is:
= $36.
Explanation:
a) Data and Calculations:
Cumulative preferred stock = $100 par value
Annual dividend on the preferred stock = 12%
Annual dividend on the preferred stock = $12
Cumulative preferred stock dividend = $24 ($12 * 2)
The amount of dividend to pay preferred stock = $36 ($24 + $12)
b) $24 was in arrears for the past 2 years. In the current year, $12 is due to the preferred stockholders as dividends. This adds up to $36 in total to be paid this year before any dividends can be paid to the common stockholders.
Match the following with each others
a. Operating activity
b. Investing activity
c. Financing activity
d. Fixed assets
e. Long-term investments
f. Common stock
g. Dividends
h. Long-term debt
i. Bank deposit
j. Journal entry
1. Long-term tangible property that a firm owns
2. Distribution of earnings to shareholders
3. A stockholders' equity account
4. Used to record purchase of a fixed asset for a note
5. A 5-year note payable
6. Sales receipt
7. A financial instrument that matures in more than I year
8. Used to record amounts received from a note payable
9. Sale of common stock
10. Purchase of common stock
Answer:
1. Long-term tangible property that a firm owns
Correct match: Fixed assets
2. Distribution of earnings to shareholders
Correct match: Dividend
3. A stockholders' equity account
Correct match: Common stock
4. Used to record purchase of a fixed asset for a note
Correct match: Journal entry
5. A 5-year note payable
Correct match: Long term debt
6. Sales receipt
Correct match: Operating activity
7. A financial instrument that matures in more than I year
Correct match: Long term investment
8. Used to record amounts received from a note payable
Correct match: Bank deposit
9. Sale of common stock
Correct match: Financing activity
10. Purchase of common stock
Correct match: Investing activity
Waterway Industries can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Muffins 0.2 $4 Coffee Cakes 0.3 $5 The company has oven capacity of 1500 hours. How much will contribution margin be if it produces only the most profitable product
Answer:
$30,000
Explanation:
Muffins Coffee Cakes
Contribution Per Unit (A) $4 $5
Oven Hours Required (B) 0.2 0.3
Contribution Per Hour $20 $16.67
Rank 1 2
Total Hours Available 1,500
Hours Required for 1 Unit of Muffin 0.2
Total Muffins Production with 1500 Hours (1,500/.2) 7,500
Contribution Per Unit $4
Total Contribution (7,500*$4) $30,000
why multinational company are developed
Answer:
Multinationals provide an inflow of capital into the developing country.
Explanation:
This capital investment helps the economy develop and increase its productive capacity.
Classification of cash flows [LO21-3, 21-4, 21-5, 21-6]
Listed below are several transactions that typically produce either an increase or a decrease in cash. Indicate by letter whether the cash effect of each transaction is reported on a statement of cash flows as an operating (O), investing (I), or financing (F) activity.
Transactions
1. Sale of Common Stock.
2. Sale of Land
3. Purchase of Treasury Stock
4. Merchandise Sales
5. Issuance of a long-term note payable
6. Purchase of merchandise
7. Repayment of note payable
8. Employee salaries
9. Sale of equipment at a gain.
10. Issuance of bonds
11. Acquisition of bonds of a another corporation
12. Payment of semiannual interest on bonds payable
13. Payment of a cash dividend
14. Purchase of a building
15. Collection of a nontrade note receivable (principal amount)
16. Loan to another firm.
17. Retirement of common stock.
18. Income taxes.
19. Issuance of short-term note payable
20. Sale of copyright
Answer and Explanation:
The classification is as follows:
1. This is the Financing activitiy
2. This is the investing activity
3. This is the Financing activity
4 This is an operating activity
5 This is the Financing activity
6 This is an operating activity
7 This is the Financing activity
8 This is an operating activity
9 This is an operating activity
10 This is the Financing activitiy
11 This is the investing activity
12 This is an operating activity
13 This is the Financing activitiy
14 This is the investing activity
15 This is the investing activity
16 This is the investing activity
17 This is the Financing activitiy
18 This is an operating activity
19 This is the Financing activitiy
20 This is the investing activity
On January 1, a machine with a useful life of 10 years and a residual value of $76000 was purchased for $280000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation
Answer:
ill try but no promises ok
out line four roles played by entrepreneurs in Kenya
Answer:
To be a successful entrepreneur it is necessary for the individual to develop essential communication skills, creativity, innovation and the ability to deal with the risks inherent in the business.
A well-positioned and competitive business is one that manages to create value for consumers by offering products and services that satisfy their wants and needs.
In Kenya, entrepreneurship has stood out as a means for citizens to seek employment and income opportunities, especially in opening up trade in products and services.
Entrepreneurship helps a country to develop by moving the economy and improving the population's quality of life, so it is necessary to have government incentives and information available on the subject.
You have been tasked with advising the dictator of a nation over what he should do to increase the countries GDP. He suggests printing money and increasing the growth rate of the money supply. He wants to give this newly printed currency to his soldiers and best political supporters. You know this will not increase GDP in the long run because:
I. Money is neutral
II. Increasing the growth of the money supply only causes inflation in the long run
III. He would only increase GDP in the long run if he distributed the money equally to all citizens
IV. He would only increase GDP in the long run only if he printed a large enough sum of money
a. I and II only I
b. II, and III only
c. I, II, III, and IV
d. III only
Answer: a. I and II only
Explanation:
Money is neutral which means that even if you change to supply of money in an economy, it will not translate to an increase in GDP because only the nominal values of things will change (as a result of inflation) while the real values of things like GDP will remain the same.
Increasing the growth of money supply by printing money would also cause inflation in the long run because the money will lose its value like goods do when their supply is increased even though demand does not. A weaker currency needs more units to buy a good which is where the inflation will come from.
The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because Group of answer choices larger firms always have lower per-unit costs than smaller firms. at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns. diminishing returns will be present when output is small, and high AFC will push per-unit cost to high levels when output is large. diseconomies of scale will be present at both small and large output rates.
Answer:
at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns.
Explanation:
In Economics, the law of diminishing marginal utility states that as the unit of a good or service consumed by an individual increases, the additional satisfaction he or she derives from consuming additional units would start decreasing or diminishing as the units of good or service consumed increases.
The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because at low levels of output, average fixed cost (AFC) will be high, while at high levels of output, marginal cost (MC) will be high as the result of diminishing returns.
This ultimately implies that, the average fixed cost (AFC) will be high at small (low-level) output rates while marginal cost (MC) will be high at large (high-level) output rates due to diminishing marginal returns.
As a result of the law of diminishing marginal returns, a business firm would experience some rising per unit costs in the short-run.
In conclusion, an increase in the level of output for a business firm will eventually lead to an increase in average total cost (ATC) and marginal cost (MC) due to the law of diminishing marginal returns.
what is the different between consumer and customer?
Answer:
The customer is one who buys product produce while the consumer is one who takes benefit or uses the product.
Cellestial Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to $200,000.
If Processed Further
Sales Value Additional
Product Units Produced at Split-Off Costs Sales Value
A1 3,000 $10,000 $2,500 $15,000
B2 5,000 30,000 3,000 35,000
C3 4,000 20,000 4,000 25,000
D4 6,000 40,000 6,000 45,000
Which product(s) should be sold at split-off to maximize profits in the short run?
a. Product A1
b. Product D4
c. Product B2
d. Products A1 and D4
Answer:
a. Product A1
Explanation:
Calculation to determine Which product(s) should be sold at split-off to maximize profits in the short run
Product A1
Additional Revenues=Sales Value-Sales value at split-Off
Additional Revenues=$15,000-$10,000
Additional Revenues=$5,000
Difference=Additional Revenues -Additional Costs
Difference=$5,000-$2,500
Difference=$2,500
Product A1 Additional Revenues Additional Costs Difference
$5,000 $2500 $2,500
Therefore the product that should be sold at split-off to maximize profits in the short run is Product A1 Which therefore means that company should sell now
Assume, for this question only, the following: During the negotiations Juan guaranteed Sarita that the business had turned a profit in each of the past 5 years. Actually, it lost money in each of those years, although Juan did not know that. When Juan made the statement about the business's profitability, however, Sarita was conferring with her attorney and did not hear it. Her friend Harry, who was observing the negotiations, heard Juan's statement. Before long, when Sarita realizes what a bad deal she's made, she laments the fact to Harry. When Harry inquires how a business that had been profitable under Juan was suddenly losing money, Sarita is confused. They finally realize that Harry heard Juan's misstatement about the business's profitability and Sarita did not. Even so, Sarita is thrilled. With Harry as her key witness, she seeks to rescind the sale agreement claiming innocent misrepresentation. Which of the following is true?
A. Rescission, because Juan intended to defraud Sarita.
B. No rescission, because Juan's claims of the business's profitability would not have been material to Sarita if she had heard them.
C. No rescission, because Juan lacked sufficient knowledge of the false nature of his statement and did not intend to trick Sarita.
D. Rescission, because Juan's claims of the business's profitability would have been material to Sarita if she had heard them. E. No rescission, because Sarita did not actually rely on Juan's false statement about the business's profitability.
Answer:
The true statement about this case is:
D. Rescission, because Juan's claims of the business's profitability would have been material to Sarita if she had heard them.
Explanation:
Though Juan was unaware that the statement was false at the time the contract was signed, the remedy is recession since no damage has been sustained by the other party. The false statement borders on negligent misrepresentation because Juan was supposed to be aware of the company's profitability by investigating the material fact. While it is not clear if reliance was placed on the statement when the contract was signed, the fact remains that there was a negligent misrepresentation.
Use the following selected information from Whitman Corp. to determine the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base.
Year 2 Year 1
Net sales $276,200 $231,400
Cost of goods sold 151,900 129,590
Operating expenses 55,240 53,240
Net earnings 27,820 19,820
Answer:
Year 1 56%
Year 2 55%
Explanation:
Calculation to determine the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base.
Year 1
Using this formula
Common size percentage for cost of goods sold for year 1 = Cost of good sold/Net sales
Let plug in the formula
Common size percentage for cost of goods sold for year 1= 129,590/231,400
Common size percentage for cost of goods sold for year 1= 56%
Year 2
Using this formula
Common size percentage for cost of goods sold for year 2 = Cost of good sold/Net sales
Let plug in the formula
Common size percentage for cost of goods sold for year 2 = 151,900/276,200
Common size percentage for cost of goods sold for year 2 = 55%
Therefore the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base is :Year 1 56% and Year 2 55%
Consider the following opportunities. Opportunity 1 requires a $4,000 cash payment now (Year 0) but will result in $14,000 cash received in Year 5. Opportunity 2 requires no cash outlay and results in $3,500 cash received in Year 3 and Year 5.
Required:
Use a 6 percent discount rate and determine whether Opportunity 1 or Opportunity 2 results in a greater NPV.
Answer:
Opportunity 1 results in a greater NPV.
Explanation:
NPV of Opportunity 1 = (Cash received in Year 5 / (100% + Discount rate)^Number of years) - Cash payment now = ($14,000 / (100% + 6%)^5) - $4,000 = $10,461.61 - $4,000 = $6,461.61
NPV of Opportunity 2 = (Cash received in Year 3 / (100% + Discount rate)^Number of years) + (Cash received in Year 5 / (100% + Discount rate)^Number of years) = ($3,500 / (100% + 6%)^3) + ($3,500 / (100% + 6%)^5) = $2,938.67 + $2,615.40 = $5,554.07
Since NPV of Opportunity 1 which is $6,461.61 is greater than NPV of Opportunity 2 which is $5,554.07, this implies that Opportunity 1 results in a greater NPV.
A conservative customer is invested in a large-cap, value-managed equity fund. The stock market drops 10% due to a poor economic forecast for the country. Your customer is upset that his conservative mutual fund lost almost as much as the stock market. What risks does your customer need to understand?
Answer:
1. Market risk
2. Systematic risk
Explanation:
Considering the situation described in the question above, my customer should understand the following risks:
1. Market risk: this is the probability that an investor will undergo losses as a result of circumstances that affect the all-around performance of investments in the financial markets.
2. Systematic risk: this is the type of risk that investors experience loss of some of their principal as a result of price volatility in the overall market which may be attributed to any of the economic, political, or social factors, but beyond the company's control.
Park Company reports interest expense of $145,000 and income before interest expense and income taxes of $1,885,000. (1) Compute its times interest earned. (2) Park's competitor's times interest earned is 4.0. Is Park in a better or worse position than its competitor to make interest payments if the economy turns bad
Answer:
(1) Park's times interest earned is 13.
(2) Park is in a BETTER position than its competitor to make interest payments if the economy turns bad.
Explanation:
(1) Compute its times interest earned.
The times interest earned, also known as the interest coverage ratio, is a coverage ratio that calculates the proportionate amount of income that can be used to cover future interest expenses.
The times interest earned can be computed as follows:
Times interest earned = Income before interest expense and income taxes / Interest expense = $1,885,000 / $145,000 = 13
Therefore, Park's times interest earned is 13.
(2) Park's competitor's times interest earned is 4.0. Is Park in a better or worse position than its competitor to make interest payments if the economy turns bad.
Because the ratio reveals how many times a company could pay interest with its pre-tax income, greater ratios are clearly better than lower ratios.
Since Park’s times interest earned of 13 is greater than its competitor’s times interest earned of 4, it therefore implies that Park is in a BETTER position than its competitor to make interest payments if the economy turns bad.
1.Marketing Myopia occurs when the company focuses on the product more than necessary to deliver a certain product.
True
False
2.Marketing offers are only restricted to tangible items like that of pens and notepads you use at class rooms.
True
False
3.Selling focuses on the needs of the buyer; marketing focuses on the needs of the seller. *
True
False
4.The deference in “Marketing Philosophy” and that of “Societal Marketing Philosophy” is that in the later we are concerned about the human welfare. *
True
False
5.Once an opinion leader it is always an opinion leader.
True
False
6.Consumers are individuals or groups who purchase a product for resell. *
True
False
7.It is more than enough for a marketer in a company to know the customer’s need and want in order to produce and deliver a certain product in the market. *
True
False
8.Human wants are the form taken by human needs as they are shaped by culture and individual personalities. *
True
False
9.What makes marketing harder is that it is hard to understand the needs and wants of the customers.

The master budget of a merchandising company includes a:_______
a. Production budget.
b. Direct materials budget.
c. Factory overhead budget.
d. Direct labor budget.
e. Purchases budget.
Answer:
a. Production budget.
Explanation:
hope it helps :>
Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which Taxes owed = (1/4 of income) - $15,000.
How much does Zooey owe or receive from the government?
a. She owes $5,000
b. She receives $10,000.
c. She owes $10,000.
d. She receives $15,000.
Answer:
b. She receives $10,000
Explanation:
Taxes owed = (1/4 of income) - $15,000.
Taxes owed = (1/4 x 20,000) - $15,000.
= 5,000 - 15,000 => -10,000
Hence, she receives $10,000 from the government.
A negative income tax is a system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.
According to purchasing power parity, if the domestic inflation rate is ________ than that in the foreign country, the domestic currency should be ________ than that of the foreign country.
Answer:
lower; stronger
Explanation:
Purchasing power parity (PPP) is a theory where the exchange rates of the states that lies between the currencies should be in equilibrium
Also their purchasing power should be similar in each and every of the two countries
So as per the purchasing power parity when the inflation rate of domestic one should be less as compared to the foreign country so the domestic currency should be stronger as compared to the foreign country
Calculate interest amount forR3000
10%p.a paid out every 6months
Answer:30
Explanation:2+2=4 -1 thats 3 quick mathd
During the year, Hamlet Inc. paid $22,000 to have bond certificates printed and engraved, paid $120,000 in legal fees, paid $18,000 to a CPA for registration information, and paid $280,000 to an underwriter as a commission. What is the amount of bond issue costs
Answer:
the issuance cost of the amount of the bond is $440,000
Explanation:
The computation of the issuance cost of the amount of the bond is given below:
Bond Certificate printing cost $22,000
Legal fees paid $120,000
CPA registration $18,000
Underwriting Commission $280,000
Total Bond issue costs $440,000
Hence, the issuance cost of the amount of the bond is $440,000
If sales are $798,000, variable costs are 72% of sales, and operating income is $258,000, what is the contribution margin ratio?
a. 72%
b. 68%
c. 28%
d. 32%
On January 22, Zentric Corporation issued for cash 160,000 shares of no-par common stock at $8. On February 14, Zentric issued at par value 45,000 shares of preferred 2% stock, $50 par for cash. On August 30, Zentric issued for cash 10,000 shares of preferred 2% stock, $50 par at $56.
Required:
Journalize the entries to record the January 22, February 14, and August 30 transactions.
Answer:
Zentric Corporation
Journal Entries:
January 22
Debit Cash $1,280,000
Credit Common Stock $1,280,000
To record the issuance of 160,000 shares, no-par at $8.
February 14
Debit Cash $2,250,000
Credit 2% Preferred Stock $2,250,000
To record the issuance of 45,000 shares , $50 par for cash.
August 30
Debit Cash $560,000
Credit 2% Preferred Stock $500,000
Credit Additional Paid-in Capital - Preferred $60,000
To record the issuance of 10,000 shares, $50 par at $56.
Explanation:
a) Data and Analysis:
January 22 Cash $1,280,000 Common Stock $1,280,000
Issuance of 160,000 shares at $8
February 14: Cash $2,250,000 2% Preferred Stock $2,250,000
Issuance of 45,000 shares , $50 par for cash.
August 30: Cash $560,000 2% Preferred Stock $500,000 Additional Paid-in Capital - Preferred $60,000
Issuance of 10,000 shares, $50 par at $56.
2 Income statement data for Starr Canning Corporation are as follows: 2009 2008 Sales $1,400,000 $1,200,000 Cost of goods sold 850,000 730,000 Selling expenses 205,000 240,000 General expenses 140,000 100,000 Income tax expense 82,000 50,000 Required a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales (vertical common-size analysis)
Answer and Explanation:
The preparation of the income statement in comparative form is presented in the attachment below
The vertical analysis refers to analysis made to the financial statements. In the balance sheet, the item with respect to the common base for the other items should be expressed in total assets while for the income statement it should be total revenues
Since we have to make the income statement so the same should be expressed in total revenues
:
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 6,100,000 $ 10,100,000 $ 9,200,000 Average operating assets $ 1,525,000 $ 5,050,000 $ 2,300,000 Net operating income $ 317,200 $ 929,200 $ 225,400 Minimum required rate of return 15.00 % 18.40 % 12.00 % Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 17% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity
Answer:
1. See the calculations under part 1 below.
2. We have:
Division A's Residual Income (loss) = $88,450
Division B's Residual Income (loss) = $0
Division C's Residual Income (loss) = ($50,600
3.a. Only Division C will accept the investment opportunity.
3.b. Divisions A and C will accept the investment opportunity.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division A Division B Division C
Sales $ 6,100,000 $ 10,100,000 $ 9,200,000
Average operating assets $ 1,525,000 $ 5,050,000 $ 2,300,000
Net operating income $ 317,200 $ 929,200 $ 225,400
Min. req'd rate of return 15.00 % 18.40 % 12.00 %
Required:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 17% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?
The explanation of the answers is now provided as follows:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
The relevant formulae to use are as follows:
Margin = Net Operating Income / Sales
Turnover = Sales / Average Operating Assets
Return on Investment = Margin * Turnover
Therefore, we have:
Division A:
Margin = $317,200 / $6,100,000 = 0.0520, or 5.20%
Turnover = $6,100,000 / $1,525,000 = 4 times
Return on Investment = 5.2% * 4 = 0.2080, or 20.80%
Division B:
Margin = $929,200 / $10,100,000 = 0.0920, or 9.20%
Turnover = $10,100,000 / $5,050,000 = 2 times
Return on Investment = 9.20% * 2 = 0.1840, or 18.40%
Division C:
Margin = $225,400 / $9,200,000 = 0.0245, or 2.45%
Turnover = $9,200,000 / $2,300,000 = 4 times
Return on Investment = Margin * Turnover = 2.45% * 4 = 0.0980, or 9.80%
2. Compute the residual income (loss) for each division.
The formula for calculating this is:
Residual Income (loss) = Net Operating Income - Minimum Required Return * Average Operating Assets
Therefore, we have:
Division A's Residual Income (loss) = $317,200 - (15.00 % * $1,525,000) = $88,450
Division B's Residual Income (loss) = $929,200 - (18.40 % * $5,050,000) = $0
Division C's Residual Income (loss) = $225,400 - (12.00 % * $2,300,000) = ($50,600)
3. Assume that each division is presented with an investment opportunity that would yield a 17% rate of return.
3-a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
The decision criterion is for a division to accept the investment opportunity if its Return on Investment (ROI) is lower than 17%.
Based on the results in part 1 above, only Division C will accept the investment opportunity.
3-b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?
The decision criterion is for a division to accept the investment opportunity if its minimum required rate of return is lower than 17%.
Based on the information in the question, Divisions A and C will accept the investment opportunity.
Duane Miller wants to know what price home he can afford. His annual gross income is $67,200. He has no other debt expenses and expects property taxes and insurance to cost $320 per month. He knows he can get a 8.50%, 15 year mortgage so his mortgage payment factor is 9.85. He expects to make a 25% down payment. What is Duane's affordable home purchase price?
a. $107,929.
b. $158,793.
c. $138,207.
d. $209,139.
e. $179,665.
