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Sonbull [250]
3 years ago
8

Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of$750,000 and a fixed cos

t of $450,000. Based on Relay's predictions, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40% discount off the regular price. Required: By what amount would income before income taxes be increased or decreased as a result of the special order
Business
1 answer:
sesenic [268]3 years ago
7 0

Answer:

The total rise in income is $30,000

Explanation:

The computation is shown below:

Sale price     3     {5 × (1 - 0.40)

Less: Incremental cost  2.5   ($750,000 ÷ 300,000)

Increase in income per unit   0.50

Divide by Total units    60,000

Total increase in income   $30,000

Hence, the total rise in income is $30,000 and the same is to be considered

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Use ergonomically designed equipment for work

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Green Caterpillar Garden Supplies Inc.'s income statement reports data for its first year of operation. The firm's CEO would lik
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Answer:

Green Caterpillar Garden Supplies Inc.

a) Income Statement for Year Ending December 31

                                                              Year 1              Year 2 (Forecasted)

Net sales                                              $30,000,000       $37,500,000

Less: Operating costs                            19,500,000          24,375,000

Depreciation &amortization expenses    1,200,000            1,200,000

Operating income (or EBIT)                  $9,300,000         $11,925,000

Less: Interest expense                              930,000              1,788,750

Pre-tax income (or EBT)                          8,370,000            10,136,250

Less: Taxes (40%)                                   3,348,000             4,054,500

Earnings after taxes                            $5,022,000            $6,081,750

Less: Preferred stock dividends               100,000                 100,000

Earnings to common shareholders      4,922,000              5,981,750

Less: Common stock dividends           2,008,800              2,432,700

Contribution to retained earnings      $2,913,200           $3,549,050

b) In Year 2, if Green Caterpillar has 5,000 shares of preferred stocks issued and outstanding, then each preferred share should expect to receive _ $20 _ in annual dividends.

-If Green Caterpillars has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from _ $12.31 _ in Year 1 to _ $14.95 _ in Year 2.

-Green Caterpillar's before interest, taxes, depreciation and amortization (EBITDA) value changed from _ $10,500,000 _ in Year 1 to _ $13,125,000_ in Year 2.

-It is _ wrong _ to say that Green Caterpillar's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $2,913,200 and $3,549,050, respectively. This is because _ not all_ of the items reported in the income statement involve payments and receipts of cash.

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a) The preferred dividend per share = Preferred Dividends divided the number of preferred stock shares.

b) The EPS is the Earnings Per Share and is calculated as Net Income to Common Stockholders divided by the number of common stock shares outstanding.

The operating cost figure may not be based on a cash basis.  It could be accrued costs.  Similarly, the net sales may as well involve sales on credit, which do not involve cash flows.

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