Question

Dave's Mirror Company produces $1,250,000 worth of mirrors this year. They expect to sell $1,000,000 worth of mirrors over the year. The company purchases $300,000 of new equipment during the year. Sales for the year turn out to be $900,000. Actual investment by Dave's Mirror Company equals _ and planned investment equals ___.

Answer 1

Answer: The options are given below:

A. $250,000; $150,000

B. $300,000; $200,000

C. $550,000; $450,000

D. $650,000; $550,000

The answer is D. $650,0000, $550,000

Explanation:

The sales for the year:

Expected sales - actual sales

=> $1,000,000 - $900,000

= $100,000

Formula for actual investment is given as:

Actual investment = planned investment + unplanned investment.

To calculate planned investment, we have:

Planned investment = planned production - expected sales

=> $1,250,000 - $1,000,000

= $250,000

Therefore, we have:

Actual investment = planned investment + unplanned investment.

=> $250,000+ purchase of new equipment ($300,000)

= $550,000.

$550,000 + $100,000

= $650,000

Therefore,

Ia = $650,000

Ip = $550,000.

Option D.

Answer 2

Answer:

$650,0000, $550,000

Explanation:

Actual investment is planned investment plus unplanned investment.

Planned investment = planned production minus expected sales, or $1,250,000 - $1,000,000 = $250,000

$250,000+ purchase of new equipment ($300,000) = $550,000.

Expected sales -Sales for the year

$1,000,000 - $900,000 = $100,000

$$550,000+$100,000=$650,000

Therefore Actual investment by Dave's Mirror Company equals $650,000 and planned investment equals $550,000