Answer:
The minimum transfer price that the Alabama Division should accept is $60 per unit.
Explanation:
The division providing the goods internally often has the opportunity to sell these same goods externally instead and so the minimum they will be willing to charge another division is cost plus their profit margin (i.e. the minimum they would normally charge an external customer).
the minimum price to be charged is :
Variable cost per unit = $24
Fixed Cost per unit = $15
Total Cost per unit = $39 and the profit margin when added makes its selling price to be equal to $60 (i.e. the price which is to be charged from outside customers).
Alabama Division will cover its minimum opportunity cost i.e. its sales price to the external customers which it will charge from Arkansas division .
Minimum transfer price = $60 per unit.
Therefore, The minimum transfer price that the Alabama Division should accept is $60 per unit.
Answer:
a. Economic profit is the excess of revenue over both opportunity (implicit) and explicit costs. Explicit costs are the cost of all inputs used.
b. The difference between economic profit and accounting profit is that in calculating economic profit, both the explicit costs and the implicit or opportunity costs are deducted from the revenue. Whereas, in computing the accounting profit, only the explicit costs are deducted from the revenue.
c. Economists measure economic profit rather than accounting profit because economists believe that the real cost of an output includes the economic or opportunity cost (potential benefits lost as a result of the course of action chosen).
Explanation:
Opportunity cost is the implicit cost incurred, which is equal to the potential benefits lost by an individual or a business, when an alternative is chosen instead of the other alternative. It is an important concept in the computation of economic profit. The concept ensures that both implicit and explicit costs are considered when determining the profits generated by a business.
Answer:
$730 and 3.53%
Explanation:
Given that
Initial Price = $103.39
Ending Price = $106.69
Dividend Paid = $0.35
Number of Shares owned = 200
The computation of the dollar return and the percent return is shown below:
Dollar return is
= [0.35 + ($106.69 - $103.39)] × 200
= $730
And, the percentage return is
= $730 ÷ (200 × $103.39)
= 3.53%
Answer:
711,300
Explanation:
Net cash generated from operating activities can be calculated by deducting and adding back the cash and non-cash items respectively from the net income for the year. Such as depreciation will be added back in net income due to it is a non-cash expense
Net Income 624,000
Depreciation and amortization 87,000
Decrease in accounts receivable 22,000
Increase in inventories (9,200)
Increase prepaid expenses (8,500)
Increase in salaries payable 10,000
Decrease in income taxes payable (14,000
)
Net cash generated from operating activities 711,300
