Answer:
(a) Payment of interest on notes payable.
Classification: Operating activity
(b) Exchange of land for patent.
Classification: Non-cash Investing and Financing activity
(c) Sale of building at book value.
Classification: Investing activity
(d) Payment of dividends.
Classification: Financing activity
(e) Depreciation.
Classification: Operating activity
(f) Receipt of dividends on investment in stock.
Classification: Operating activity
(g) Receipt of interest on notes receivable.
Classification: Operating activity
(h) Issuance of common stock.
Classification: Financing activity
(i) Amortization of patent.
Classification: Operating activity
(j) Issuance of bonds for land.
Classification: Non-cash Investing and Financing activity
(k) Purchase of land.
Classification: Investing activity
(l) Conversion of bonds into common stock.
Classification: Non-cash Investing and Financing activity
(m) The loss on the sale of land.
Classification: Operating activity
(n) Retirement of bonds.
Classification: Financing activity
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.7 percent. Stock X has an expected return of 11.4 percent and a beta of 1.25, and Stock Y has an expected return of 8.68 percent and a beta of .85. How much money will you invest in Stock Y? What is the beta of your portfolio? (2 pts)
Answer: See explanation
Explanation:
a. How much money will you invest in Stock Y?
Let the weight of Stock X = x
Let the weight of Stock Y = (1 - x)
Expected return of stock X = 11.4%
Beta of stock X = 1.25
Expected return of stock Y = 8.68%
Beta of stock X = 0.85
The Portfolio Return will then be calculated as:
= (Weight of Stock X × Return of Stock X) + (Weight of Stock Y × Return of Stock Y)
0.127 = [x × 0.114 + (1 - x) × 0.0868]
0.127 = [x × 0.114 + 0.0868 - x × 0.0868]
0.127 = x × 0.0272 + 0.0868
0.127 - 0.0868 = x × 0.0272
0.0402 = 0.0272x
x = 0.402/0.0272
x = 1.4779
Weight of Stock X = 1.4779
Therefore, Weight of Stock Y will be:
= 1 - 1.4779
= -0.4779
The amount that's invested in Stock Y will be:
= $100,000 × (-0.4779)
= -$47,790
b. What is the beta of your portfolio?
Portfolio Beta will be calculated as:
= 1.4779 × 1.25 + (-0.4779) × 0.85
= 1.44
Completing market research and determining a target market is part of this section of the marketing plan.
O market analysis
O competitive analysis
O marketing strategies
Ostatement of objectives
Option A is correct regarding marketing plan.
What is market analysis?An in-depth analysis of the target market and competitive environment for your company within a given sector is known as a "market." The success you can anticipate when you launch your brand and its products to customers in the market can be projected using this study. Market analysis takes into account both qualitative and quantitative information, such as consumer values, wishes, and purchasing motivations. Quantitative information includes the size of the market you want to target as well as the pricing and revenue estimates that consumers are ready to pay.
What is market research?In order to effectively advertise products to a specific market, market research is the process of acquiring knowledge about that market, including its customers' wants and behaviors.
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a. Fiscal Policy involves changing _______________. In the United States, Fiscal Policy is implemented by the ____________.
b. _____________ can be used to address a Recessionary Gap by ________________ taxes and ___________________ government purchases.
Answer:
a. Fiscal Policy involves changing government purchases and tax. In the United States, Fiscal Policy is implemented by the federal government.
b. An expansionary fiscal policy can be used to address a Recessionary Gap by reducing taxes and increasing government purchases.
Explanation:
Fiscal policy can be described as the employment of the government purchase and taxation level by the federal goveernment with the aim of influencing the aggregate demand and economic activity level.
Expansionary fiscal policy occurs when the government increases its purchases and reduces taxes in order to close Recessionary Gap, while contractionary fiscal policy is when the government reduces it purchases and increases taxes.
Based on this explanation, we have:
a. Fiscal Policy involves changing government purchases and tax. In the United States, Fiscal Policy is implemented by the federal government.
b. An expansionary fiscal policy can be used to address a Recessionary Gap by reducing taxes and increasing government purchases.
Explain international trade, alliance and conflict
The graph represents the market for artichokes (in pounds per week) at a Midwest farmers' market. Suppose the equilibrium price of
artichokes is $3 per pound and the equilibrium quantity is 100 pounds of artichokes per week.
Using the graph determine how much economic surplus is generated in the market each week.
4
Economic surplus: $
The producer surplus created for suppliers of artichokes each week are $100.
What is surplus?When you have more of something that you need or expect to utilize, you have a surplus. When there is extra stockpile is, when the quantity given exceeds the quantity requested—a market surplus occurs. Surplus is an economic phrase that refers to the amount of advantage or sources to support by consumers and manufacturers when they exchange goods and services.
Equilibrium price = $3 per pound
Equilibrium quantity = 100 pounds
Y-intercept of supply curve = $1 per pound
Determine the Producer Surplus -
producer surplus = 1/2 × [Equilibrium price - Y-intercept of supply curve] × Equilibrium quantity
producer surplus = 1/2 × [$3 - $1] × 100
producer surplus = 1/2 × [$2] × 100
producer surplus = 1/2 × 200
PS = $100
Thus, the producer surplus created for suppliers of artichokes each week are $100.
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Your question is incomplete, but most probably the full question was.
The graph represents the market for artichokes (in pounds per week) at a Midwest farmers' market. If the equilibrium price is $3 per pound and the equilibrium quantity is 100 pounds per week, what is the producer surplus created for suppliers of artichokes each week?9.
Which must pass through the state probate court system?
O A. Testamentary trust
O B. Living trust
O C. Pour-over trust
Before a will is written, a testamentary trust must go through probate. The correct answer is option (a).
What do you mean by probate?Before a will is written, a testamentary trust must pass through probate. In the course of probating the will, the executor will also establish the trust. Legal expenses may be deducted from the trust funds if the trustee needs legal counsel on how to manage the trust.
The term "probate" refers to a copy of a will that has been witnessed by a court official and is accompanied by a grant of management of the testator's assets. Only the will's appointed executor is eligible for a probate. A probate is also required if the will covers real estate in more than one state.
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Diemia Hospital has been considering the purchase of a new x-ray machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $170,000. The new machine will cost $700,000 and an additional cash investment in working capital of $115,000 will be required. The new machine will reduce the average amount of time required to take the x-rays and will allow an additional amount of business to be done at the hospital. The investment is expected to net $150,000 in additional cash inflows during the year of acquisition and $180,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life.
Required:
What is the net present value of the investment, assuming the required rate of return is 9%? Would the hospital want to purchase the new machine?
Answer:
1. Present value of cash-out flow = Purchase of new machine + Cost of working capital - Sale of old machine
Present value of cash-out flow = $700,000 + $115,000 - $170,000
Present value of cash-out flow = $645,000
Year Cash flow PVF 9% Net cash flow
1 $150,000 0.917 $137,550
2 $180,000 0.842 $151,560
3 $180,000 0.772 $138,960
4 $180,000 0.708 $127,440
5 $180,000 0.65 $117,000
Present value of Cash inflow $672,510
Present value of Cash outflow ($645,000)
Net present value $27,510
2. Yes, Hospital would want to purchase the new machine because the Net present value is positive.
What happens first when the demand for a fad peaks and falls?
Explanation:
What happens first when the demand for a fad peaks and falls? he quantity supplied goes down, and the price goes up.If the demand for a fad peaks falls, the quantity will likely go down as the demand of the product What happens first when the demand for a fad peaks and falls? he quantity supplied goes down, and the price goes up.got less making the quantity to be also less, though because of it, the price are likely to go up as their products are only few in quantity. The correct answer is the sec
Answer:
the quantity supplied goes down, and the price goes up
Explanation:
Customer goods returned will be credited to which account ?
Answer:
Goods Account (based on the question)
Alternatively :
In Accounts you would usually have a seperate account called ' Returns Inward' and they will be debited there.
You are long 10 put contracts on Cisco (CSCO) with a strike price of $55.00. The option premium is $1.75 per share, and the market price of CSCO on the day you enter the contracts is $54.25. If you are long the underlying shares of CSCO, what will the total gain or loss be of your position if you exercise the contracts when CSCO is selling for $49.00 per share
Answer:
$42.50
Explanation:
Here, buying a put option means that the option holder will gain when the share price falls below the strike price.
Strike price is $55
Premium paid is $1.75 per share
Premium paid = $1.75 * 10 = $17.5
Shares are selling for $49
=> $(55- 49) * 10 contracts = $60.
So, net profit = $60 - $17.5 = $42.5
The Power Tool Division of ABC Hardware sells one product, Jig Saw, and has the following data for the second quarter: Units of output 1,200 units Price per unit $ 150 Variable cost per unit 90 Total fixed costs 48,000 Required: Determine the following: 1. Quarterly operating profit when 1,200 units are sold. 2. Break-even volume in units. 3. Contribution margin ratio. 4. Break-even volume in sales dollars. 5. Sales dollars and units needed to generate an operating profit of $57,000. 6. Number of units sold that would produce an operating profit of 15% of sales dollars. 7.
Answer:
Results are below.
Explanation:
A)
We need to determine the profit when 1,200 units are sold:
Operating profit= total contribution margin - fixed costs
Operating profit= 1,200*(150 - 90) - 48,000
Operating profit= $24,000
B)
To calculate the break-even point in units, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 48,000 / (150 - 90)
Break-even point in units= 800 units
C)
Now, the contribution margin ratio:
Contribution margin ratio= (150 - 90) / 150
ontribution margin ratio= 0.4
D)
To calculate the break-even point in dollars, we need to use the following formulas:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 48,000/0.4
Break-even point (dollars)= $120,000
E)
Desired profit= $57,000
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (48,000 + 57,000) / 60
Break-even point in units= 1,750
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= 105,000 / 0.4
Break-even point (dollars)= $262,500
F)
Desired profit= 15%
Number of units to be sold= Break-even point*1.15
Number of units to be sold= 800*1.15
Number of units to be sold= 920
EcoMotors’s disclosure notes for the year ending December 31, 2017, included the following regarding its $0.001 par common stock: Employee Stock Purchase Plan Our employees are eligible to purchase our common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The purchase price would be 85% of the lower of the fair market value on the first and last trading days of each six-month offering period. During the years ended December 31, 2017, 2016, and 2015, we issued 221,071, 164,100 and 221,071 shares under the ESPP for $38.0 million, $29.1 million and $14.3 million, respectively. There were 3,620,749 shares available for issuance under the ESPP as of December 31, 2017. Required: Prepare the journal entry that summarizes EcoMotors’s employee share purchases for the year ending December 31, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
Answer:
Date General journal Debit Credit
Dec 31, 2017 Cash $38,000,000
Compensation expense $6,705,882
[($38,000,000/85%)*15%]
Common stock [221,071 * $0.001] $221
Paid in capital - in excess of par $44,705,661
On January 1, 2017, Chamberlain Corporation pays $503,200 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $19,800 results from the acquisition. On December 31, 2018, Neville reports revenues of $460,000 and expenses of $328,000 and Chamberlain reports revenues of $784,000 and expenses of $440,000. The parent figures contain no income from the subsidiary. What is consolidated net income attributable to Chamberlain Corporation
Answer:
Explanation:
Calculation to determine consolidated net income attributable to Chamberlain Corporation
Using this formula
Consolidated net income attributable to Chamberlain Corporation=[(Neville Revenues-Neville Expenses)+(Chamberlain Revenues-Chamberlain Expenses)- Annual excess fair-value amortization]-[(Neville Revenues-Neville Expenses)-Annual excess fair-value amortization*percentage of ownership in Neville.
Let plug in the formula
Consolidated net income attributable to Chamberlain Corporation=[($460,000-$328,000)+($784,000-$440,000)-$19,800]-[($460,000-$328,000)-$19,800*40%]
Consolidated net income attributable to Chamberlain Corporation=($132,000+$344,000-$19,800)-($132,000-$7,920)
Sunland Company's accounting records reflect the following inventories: Dec. 31, 2019 Dec. 31, 2020 Raw materials inventory $ 78000 $ 62000 Work in process inventory 102000 114000 Finished goods inventory 100000 92000 During 2020, Sunland purchased $1450000 of raw materials, incurred direct labor costs of $250000, and incurred manufacturing overhead totaling $160000. How much raw materials were transferred to production during 2020 for Sunland
Answer:
$1,466,000.00
Explanation:
Calculation to determine How much raw materials were transferred to production during 2020 for Sunland
RAW MATERIALS TRANSFERRED TO PRODUCTION
Beginning Raw material inventory $78,000.00
Raw material Purchases $1,450,000
Total Raw material available for use $1,528,000.00
($78,000+$1,450,000)
Less: Ending Raw material inventory $62,000.00
Raw materials transferred to production $1,466,000.00
($1,528,000.00-$62,000.00)
Therefore the Amount of raw materials that were transferred to production during 2020 for Sunland is $1,466,000.00
how much you proposed in marketing budget in your cherry mobile brands
Answer:
If part of your marketing strategy was to release a mobile app, you will also need to budget for prototype testing. This is important to ensure that your mobile app is user friendly and that you can fix any issues that may arise. The average app marketing budget is estimated to be between $1,000 and $5,000.
Explanation:
take a look at the figure. The basic shape of the body of the lamp shown is a A. cylinder. B. pyramid. C. cone. D. sphere.
The basic shape of the body of the lamp shown is the cone. A cone is formed by a set of line segments, half-lines, or lines connecting a common point.
What is a cone?The cone in the shape of the figure is a three-dimensional geometric shape. That smoothly forms a flat base to a point called the apex or vertex. A cone is formed by a set of line segments, half-lines, or lines connecting a common point, the apex. the points on a base that is in a plane that does not contain the apex.
A cone refers that a shape consisting of a circular base and the once continuous curved base tapering to a point (the apex) above the center of the circular base.
Therefore, The lamp shown is the cone. A cone is formed by a set of line segments
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SMART goals are recorded here and lay the groundwork for the marketing plan.
O market analysis
O marketing strategies
O statement of objectives
O competitive analysis
SMART goals are recorded here and lay the groundwork for the marketing plan: C. statement of objectives.
What is marketing?In Business management, marketing can be defined as a strategic process which typically involves developing promotional techniques and sales strategies by a business firm to enhance the availability of goods (products) and services, in order to meet the needs of the end users or consumers through advertising and market research.
What are SMART goals?In Business management, SMART goals can be defined as a well-established tool that can be used by an individual, a project manager or business organization to plan (create), track and achieve (accomplish) both short-term and long-term goals.
Generally speaking, SMART is a mnemonic acronym and it comprises the following elements:
SpecificMeasurableAchievable or Attainable.Realistic (results oriented).TimelyIn this scenario, we can reasonably infer and logically deduce that SMART goals are recorded as statement of objectives because they would lay the groundwork for the marketing plan.
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A interest rate that changes based on the base rate used by the bank
A. Current
B. Fixed
C. High
D. Variable
Answer:
D
Explanation:
An MNC considers establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value
Answer:
NZ$25 million
Explanation:
Assuming salvage value = X
Cash flow in year 1 = 12 million*0.60 = $7.2 million
Cash flow in year 2 = 30 million*0.60 = $18 million
Note: At break-even salvage value, Net Present Value = 0
So, Initial cost = Present value of inflow (Sum of inflow*PV factor)
Initial cost = 7.2(PV 18%, 1 year) + 18(PV 18%, 2 years) + X(PV 18%, 2 years)
30 = 7.2*0.847 + 18*0.718 + X*0.718
30 = 19.02 + X*0.718
X*0.718 = 30 - 19.02
X*0.718 = 10.98
X = 10.98/0.718
X = 15.292479
X = $15.29
Stable exchange rate of $.60 per NZ$ over the next two years.
Break-even salvage value = 15.29/0.60
Break-even salvage value = NZ$25.4833
Break-even salvage value = NZ$25 million
Production Budget Pasadena Candle Inc. projected sales of 800,000 candles for January. The estimated January 1 inventory is 35,000 units, and the desired January 31 inventory is 20,000 units. Prepare a production budget report in units for Pasadena Candle Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Pasadena Candle Inc. Production Budget For the Month Ending January 31 fill in the blank 2 fill in the blank 4 Total units available fill in the blank 5 fill in the blank 7 Total units to be produced in January fill in the blank 8
Answer:
Production budget for Pasadena Candle Inc
Expected units to be sold 800,000
Desired ending inventory, Dec 31 20,000
Total units available 820,000
Estimated beginning inventory, Jan 1 -35,000
Total units to be produced in Jan. 785,000
Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or Rate Direct labor 0.50hours$24.00per hour Variable overhead 0.50hours$4.40per hour In August the company produced 8,300 units using 4,260 direct labor-hours. The actual variable overhead cost was $17,466. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:
Answer:
$484 U
Explanation:
The variable overhead efficiency variance is computed as
= (Actual labor hours - Budgeted labor hours) × Hourly rate for standard variable overhead
Variable overhead efficiency variance
= [(4,260 - (8,300×0.5)] × $4.40
= (4,260 - 4,150) × $4.40
= $484 U
Therefore, the variable overhead efficiency variance for August is $484 U
The wide range of different social and ethnic backgrounds of people from varied cultures, genders, sexual orientation, religion, and other unique life perspectives is called
cultural sensitivity
diversity
inclusivity
variety
Answer:
cultural sensitivity
Explanation:
A
Answer:
Explanation: DIVERSITY
Diversity refers to the condition of having people varying in social and ethnic backgrounds, genders, sexual orientations, etc
ice Manager uses a Periodic Review Inventory System: they check the inventory in the Office Supply Closet once every 10 days, placing an order with their supplier depending on the inventory level in the closet. Once the order is placed, it takes 3 days to receive the order. The average demand for file folders is 70 per day. This week, the operator has counted 240 file folders in the closet. What is the Minimum Restocking Level (restocking policy) needed to cover expected demand over time without stocking out?
Answer:
910 days
Explanation:
Calculation to determine the Minimum Restocking Level needed to cover expected demand over time without stocking out
Using this formula
Minimum Restocking Level= (Average daily demand × Reorder period)+ (Average daily demand × Lead time)
Let plug in the formula
Minimum Restocking Level= (70 days × 10 days) + (70 days × 3 days)
Minimum Restocking Level=700 days + 210 days
Minimum Restocking Level= 910 days
Therefore the Minimum Restocking Level needed to cover expected demand over time without stocking out is 910 days
United Resources Company obtained a charter from the state in January of this year. The charter authorized 218,000 shares of common stock with a par value of $2. During the year, the company earned $494,000 Also during the year, the following selected transactions occurred in the order given:
a. Sold 83,000 shares of the common stock in an initial public offering for $13 per share.
b. Repurchased 23,000 shares of the previously issued shares for $16 per share.
c. Resold 3,000 shares of treasury stock for $19 per share.
Required:
Prepare the stockholders’ equity section of the balance sheet at December 31, 2014. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
United Resources Company
Stockholders' Equity Section of the Balance Sheet at the end of the year:
Authorized share capital:
Common stock, $2 par, 218,000 shares
Issued and Outstanding shares:
Common stock, $2 par, 66,000 shares $172,000
Additional paid-in capital - common stock 642,000
Treasury stock, $2 par, 20,000 shares (40,000)
Retained earnings 494,000
Total equity $1,268,000
Explanation:
a) Data and Analysis:
Authorized share capital:
Common stock, $2 par, 218,000 shares
Net income for the year = $494,000
Transactions:
a. Cash $1,079,000 Common stock $166,000 Additional Paid-in Capital - Common $913,000
83,000 shares of the common stock in an initial public offering for $13 per share.
b. Treasury stock $46,000 Additional Paid-in Capital- Common stock $322,000 Cash $368,000
23,000 shares of the previously issued shares for $16 per share.
c. Cash $57,000 Common stock $6,000 Additional Paid-in Capital - Common stock $51,000
3,000 shares of treasury stock for $19 per share.
If the consumption function is defined as C = 5,500 + 0.9Y, what is the
autonomous level of consumption expenditure?
A. $4,950
B. $5,500
C. $6,050
D. $6,111
Answer:
Option B ($5,500) is the appropriate choice.
Explanation:
The given expression is:
⇒ [tex]C = 5,500 + 0.9Y[/tex]
At the zero (0) level of income, the consumption would be the Autonomous consumption.
then,
Y = 0
On substituting the value of "Y" in the given expression, we get
⇒ [tex]C=5,500+0.9(0)[/tex]
⇒ [tex]=5,500+0[/tex]
⇒ [tex]=5,500[/tex] (%)
What is your favorite quote? At the top of your journal entry, type out one quote that is a source of inspiration or motivation for you. Place quote marks around it and include an APA style in-text citation next to it.
In a paragraph of 8-10 sentences, explain why you like this quote. Develop your paragraph by sharing personal examples, explanation, and connections to other ideas in this course or other media you have seen, heard, or read.
After your paragraph, create an APA style reference entry for the website or page where you found this quote.
A quote that can be a source of inspiration or motivation for the development of knowledge and critical reasoning is:
"Reading provides the spirit with materials for knowledge, but only thinking makes what we read our own". (John Locke)What is critical reasoning?It corresponds to the ability of human beings to analyze a theory, opinion and vision on a topic according to their own perspectives and rational and logical precepts, always seeking to observe, investigate, contest and prove a thought taken as true.
Therefore, the phrase of the famous Enlightenment thinker John Locke helps in understanding the importance of thought for society, taking reason as the source of knowledge and development of society and individuals.
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Robert believes that entrepreneurship will help you in other aspects of your life. What do you think?
Sheffield Corp. is planning to sell 1070 boxes of ceramic tile, with production estimated at 800 boxes during May. Each box of tile requires 44 pounds of clay mix and a 0.50 hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $17 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Sheffield has 3300 pounds of clay mix in beginning inventory and wants to have 5400 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month
Answer:
Results are below.
Explanation:
Giving the following information:
Production= 800 boxes
Each box of tile requires 0.50 hours of direct labor.
Employees of the company are paid $17 per hour.
First, we need to determine the number of hours required:
Number of hours= 800*0.5= 400 hours
Now, the total direct labor cost:
Direct labor cost= 400*17= $6,800
Cheyenne Corp. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $170000 and credit sales are $1710000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Cheyenne Corp. make if the Allowance for Doubtful Accounts has a credit balance of $3400 before adjustment? Bad Debt Expense 8500 Allowance for Doubtful Accounts 8500 Bad Debt Expense 5100 Accounts Receivable 5100 Bad Debt Expense 5100 Allowance for Doubtful Accounts 5100 Bad Debt Expense 8500 Accounts Receivable 8500
Answer:
See below
Explanation:
Given the above information, the adjusting entry for Chynne will be;
Consultant Co. is in the business of public relation consulting. The firm has two units: Government (working with various levels of government) and Corporate (working with different corporations). For government contracts, the firm can charge the total cost plus 15% in their consulting fees (a cost-plus contract). For corporate contracts, the firm can only charge a lump sum that is negotiated and signed into the contract.
The costs are estimated for the two units as the following:
Government Corporate Total
Direct costs 45000 75000 120000
Chief consultant input hours 300 700 1000
Total hours worked 1000 2000 3000
Consultant Co. has a total indirect costs total $1.2 million for the year.
a. If the firm chooses direct cost as their cost driver, how would the indirect costs be allocated to the two units? What is the expected revenue that they can generate from the Government unit?
b. If the firm chooses to allocate costs based on chief consultant input hours, how would the indirect costs be allocated to the two units? What is the revenue from the Government unit?
c. If the firm chooses total hours worked as the cost driver, how would the indirect costs be allocated to the two units? What is the revenue from the Government unit?
Answer: See attachment
Explanation:
a. Based on the information in the attachment, the indirect costs that's allocated to the units will be:
Government = 450,000
Corporate = 750,000
The expected revenue that can be generated from the government unit will be:
= 495,000 × (100% + 15%)
= 495,000 × 1.15
= $569250
b. Based on the information given, the indirect costs that's allocated to the units will be:
Government unit = 360,000
Corporate unit = 840,000
The revenue from the government will be:
= 405000 × (100% + 15%)
= 405000 × 115%
= 405000 × 1.15
= $465750
c. If the firm chooses total hours worked as the cost driver, the indirect costs be allocated to the two units as:
Government = 400,000
Corporate unit = 800,000
Revenue from government will be:
= 445000 × 115%
= 445000 × 1.15
= $511750
Check attachment for further explanation.