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Answer:
a. $750,000
Explanation:
We can compute the depletion expense by dividing investment by total available capacity of the coal mine. We charge the full investment as there is no salvage value.
Depletion expense = 15 / 20 = $0.75 million per million tons.
Total extracted coal = 1,000,000
so depletion expense for the first year = 1,000,000 * 0.75 = $750,000
We calculated depletion as we would any depreciation and charge it on activity basis which is the amount of coal extracted.
Hope that helps.
Answer:
The Law of Demand and Supply help us understand how prices are reached in a market.
The Law of Demand states that the higher the price of a good, the lesser the quantity demanded of that good by consumers. Looking at the graph attached, you will see that the demand curve is downward sloping. This is because of the law of demand.
Notice that when the price of the good is $20, there are 4,000 units demanded but when the price goes up to $30, there are now 3,000 units demanded. Consumers demand less of a good as it gets more expensive because it increases their opportunity cost. This means that the money they are spending on a good could be spent elsewhere and if that amount keeps rising, it reduces the quantity of other goods they can get.
The Law of Supply applies to suppliers and states that as prices increases, Suppliers will supply more goods and services because they will have the incentive of more profit guiding them. For that reason the Supply curve will be upward sloping. Notice how at a price of $20, the supply is only 2,000 but when the price rises to 30, the supply increases to 3,000.
The price of a commodity is determined at the Equilibrium point where the Demand and Supply Curves intersect. At this point, the amount that people are willing to pay for a certain quantity of goods matches the price that suppliers are willing to supply the same quantity of goods for. In the graph you will notice that price is $30 and the quantity is 3,000.
Answer:
Net income= $21,480
Explanation:
Giving the following information:
Raw materials used $ 17,600
Direct labor wages 33,600
Depreciation on production equipment 3,060
Rent on manufacturing facilities 4,060
Total manufacturing cost= 58320
Sales salaries and commissions 25,600
Administrative supplies and utilities 5,600
Sales revenue 111,000
Units produced 4,600
Units sold 4,600
In this case total manufacturing cost= cost of goods sold.
Income statement:
Sales= 111,000
COGS= 58320 (-)
Gross profit= 52,680
Sales salaries and commissions 25,600 (-)
Administrative supplies and utilities 5,600 (-)
Net income= $21,480