Answer:
a. $100, and her economic profits are $25
Explanation:
Accounting profit = Revenue - Explicit Cost
$150 - $50 = $100
Economic profit = Accounting profit - Opportunity cost
$100 - ($ 15 × 5)
$100 - $75 = $25
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Answer:
e.$7,200
Explanation:
For computing the closing stock under variable costing, first we have to determine the product cost per unit which is shown below:
= (Direct materials cost + direct labor cost + Variable factory overhead cost) ÷ (production units)
= ($25,000 + $35,000 + $12,000) ÷ (20,000 units)
= $3.6 per unit
Now the closing stock would be
= 2,000 units × 3.6 per unit
= $7,200
The ending inventory units would be
= 20,000 - $18,000
= 2,000
Answer:
Effect on income= $4,800 increase
Explanation:
Giving the following information:
Unitary variable cost= $18
A foreign wholesaler offers to purchase 4800 units at $21 each. Vaughn would incur special shipping costs of $2 per unit if the order were accepted.
Because it is a special order and there is unused capacity, we will not take into account the fixed costs.
Effect on income= 4,800*21 - 4,800*(18 + 2)= $4,800 increase
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Answer:
The statement the the Return on Equity will decline is False.
Explanation:
The following terms can be defined as follows;
1. Debt
Debt can be defined as money that is owed. It is a financial obligation that is due. In a firm that is in business, debt can be defined as money that is borrowed from a financial institution like a bank. Firms usually borrow loans with a promise to pay back in the future, usually with interest involved. Debt if invested carefully can help a company grow, however, if misused it can lead to negative consequences like default. When debt is overused, the liabilities outweigh assets.
2. Interest cost
Interest cost is the additional cumulative amount that a borrower pays to the lender to cover the lenders risk and operational costs. The interest cost is a function of the debt. An increased debt obligation usually increases the interest costs.
3. Profit margin
The profit margin can be defined as the amount of revenue less the total expenditure. Expenditure includes; operational costs of running the business and interest costs. It therefor means that increasing interest costs leads to a reduction in the profit margin.
4. ROE
Return on Equity is a measure of financial performance, calculated by dividing the net income by the shareholder's equity. The net income is total expenditure subtracted from the total revenue, and the shareholder equity is calculated by subtracting total debt from the assets. Therefor an increase in debt reduces the total shareholder's equity which in turn increase the return on equity. The above statement is therefor false.