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nikklg [1K]
4 years ago
13

The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in

sales will have on operating income. true or false
Business
1 answer:
Zarrin [17]4 years ago
5 0

Answer: TRUE

Explanation:

The DEGREE OF OPERATING LEVERAGE (DOL) is a ratio that measure just how much operating income will change if there is a change in sales.

The formula is the % change in EARNINGS BEFORE TAX/ % change in SALES.

This measure therefore assists analysts in estimating the impact of any change in sales in a company.

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For each of the following transactions below, prepare the journal entry (if one is required) to record the initial transaction a
Nikitich [7]

Answer and Explanation:

the journal entries are as follows:

a Prepaid rent $213,000

               To cash  $213,000

(To record prepaid rent)  

Adjusting entry:  

Rent expense $71,000  ($213,000 ÷ 3)  

        Prepaid rent  $71,000

(To record September rent expense)  

b Cash $840,000

         To unearned sales revenue $840,000

(To record cash received on season sales)  

Adjusting entry:  

Unearned sales revenue  ($840,000 ÷ 12)  $70,000

          Sales revenue $70,000

(To record sales revenue recognised)  

c Cash $300,000

      Note payable  $300,000

(To record note payable issued on borrowed amount )  

Adjusting entry:  

Interest expense ($300,000 × 6% ÷ 12) $1,500

         Interest payable   $1,500

(To record interest payable due)  

d Prepaid advertising 3,500

          To Cash 3,500

(To record cash paid for advertising)  

Adjusting entry:  

Advertising expense ($3,500 ÷  60) × 20 $1,167

   To prepaid advertising  $1,167

e No entry  

Adjusting entry:  

Accounte receivable ($160,000 × 8%) $12,800

        Sales revenue   $12,800

(To record amout due)  

6 0
3 years ago
Quarter-inch stainless-steel bolts, 1.5 inches long are consumed in a factory at a fairly steady rate of 50 per week. The bolts
natta225 [31]

Answer:

a.

EOQ = 2,944 units

b.

Setup cost = Numbers of Order x Ordering cost = $8.83

Holding Cost = $8.83

Explanation:

a.

Economic order quantity is the quantity at which business incur minimum cost. This is the level of order where the holding cost equals to the ordering cost of the business.

As per given data

Annual Demand = 50 per week x 52 weeks in a year = 2,600 bolts

Ordering cost = $10

Carrying cost = $0.03 x 20% = $0.006

EOQ =  \sqrt{\frac{2 X S X D}{H} }

EOQ = \sqrt{\frac{2 X 10 X 2,600}{0.006} }

EOQ = 2,943.92 = 2,944 units

b.

Setup cost = Numbers of Order x Ordering cost = (2,600 / 2,944) x $10 = $8.83

Holding Cost = (2,944 / 2) x $0.006 = $8.83

6 0
3 years ago
Choose the best inference based on the following statement from a corporation president: “Our employees are the greatest resourc
lord [1]
If this question has the same choices like the previous ones posted here, then the answer would be letter letter C. <span>The speaker is willing to improve workplace safety.
</span><span>
Choices to this question are:
a. The speaker is an environmentalist and wants to preserve resources.
b. The speaker is concerned that employees will be lazy.
c. The speaker is willing to improve workplace safety.
d. The speaker will not allow OSHA or the EPA to inspect their job site.</span>
4 0
3 years ago
Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20 years to maturity twith a c
Gemiola [76]

Answer:

The after-tax cost of debt : 3.90%.

Explanation:

The semi-annual coupon = 1,000 x 5% /2 = $25.

The before-tax cost of debt, denoted as i, is the yield to maturity of the company's debt, which is calculated as below:

(25/i) x [1 - (1+i)^-40] + 1,000/(1+i)^40 = 854 <=> i = 3.147%.

=> Because the debt is semi-annual compounded, we have the: Effective annual rate = Before-tax cost of debt =  ( 1+ 3.147%)^2 -1 = 6.39%.

=> After tax cost of debt = Before tax cost of debt x ( 1 - tax rate) = 6.39% x ( 1 - 0.39) = 3.90%.

So, the answer is 3.90%.

4 0
3 years ago
Last week, Railway Tours paid its annual dividend of $1.20 per share. The company has been reducing the dividends by 10 percent
Brrunno [24]

Answer: $4.70

Explanation:

The Gordon Growth Model allows for the calculation of stock value using the predicted growth rate of dividends and the discount rate.

The formula is;

Value of stock = Next Dividend / ( Discount rate - growth rate)

Next Dividend = Current dividend * growth rate

= 1.2 * ( 1 - 0.1)

= $1.08

Value of Stock = 1.08 / ( 13% - (-10%))

= 1.08 / ( 13% + 10%)

= 1.08 / 23%

= $4.70

8 0
3 years ago
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