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3 years ago

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:

Business

1 answer:

aliina [53]3 years ago

7 0

Answer:

Todrick Company

1. Contribution Format Income Statement:

Sales $ 405,000

Beginning merchandise inventory $ 27,000

Purchases $ 270,000

Ending merchandise inventory $ 13,500

Variable selling expense $ 20,250

Variable administrative expense $ 20,250

Total variable costs 324,000

Contribution margin $ 81,000

Fixed selling expense $ 40,500

Fixed administrative expense $ 16,200 56,700

Net operating income $ 24,300

2. Traditional Format Income Statement:

Sales $ 405,000

Beginning merchandise inventory $ 27,000

Purchases $ 270,000

Ending merchandise inventory $ 13,500 283,500

Gross profit 121,500

Variable selling expense $ 20,250

Variable administrative expense $ 20,250

Fixed selling expense $ 40,500

Fixed administrative expense $ 16,200 97,200

Net operating income $ 24,300

3. The selling price per unit = $405,000/1,000 = $405

4. The variable cost per unit = $324,000/1,000 = $324

5. The contribution margin per unit = $81,000/1,000 = $81

6. The contribution format income statement would be more useful to managers in estimating how net operating income will change in response to changes in unit sales. The contribution format income statement helps in identifying the variable and fixed elements of costs. Without this separation, it is not possible to estimate how this change responds to unit sales.

Explanation:

a) Data and Calculations:

Sales $ 405,000

Beginning merchandise inventory $ 27,000

Purchases $ 270,000

Ending merchandise inventory $ 13,500 283,500

121,500

Variable selling expense $ 20,250

Variable administrative expense $ 20,250 40,500

Contribution margin $ 81,000

Fixed selling expense $ 40,500

Fixed administrative expense $ 16,200 56,700

Net operating income $ 24,300

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The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $940,000,

Tanya [424]

Answer:

a. Year 0 Net Cash Flows = $984,000

b. We have:

Year 1 net operating cash flows = $306,159

Year 2 net operating cash flows = $332,986

Year 3 net operating cash flows = $261,479

c. Additional Year 3- cash flow = $504,877

d. The machine should be purchased.

Explanation:

We start by first calculating the following:

Initial Investment = Base Price + Modification Cost = $940,000 + $25,000 = $965,000

Useful Life = 3 years

Depreciation in Year 1 = 0.3333 * $965,000 = $321,634.50

Depreciation in Year 2 = 0.4445 * $965,000 = $428,942.50

Depreciation in Year 3 = 0.1481 * $965,000 = $142,916.50

Book Value at the end of Year 3 = $965,000 - $321,634.50 - $428,942.50 - $142,916.50 = $71,506.50

After-tax Salvage Value = Salvage Value - (Salvage Value - Book Value) * Marginal tax rate = $624,000 – ($624,000 - $71,506.50) * 25% = $485,877

Initial Investment in NWC = $19,000

We can now proceed as follows:

a. What is the Year 0 net cash flow?

Year 0 Net Cash Flows = Initial Investment + Initial Investment in NWC = $965,000 + $19,000 = $984,000

b. What are the net operating cash flows in Years 1, 2, 3?

Year 1 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 1) = ($301,000 * (1 – 0.25)) + (0.25 * $321,634.50) = $306,159

Year 2 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 2) = ($301,000 * (1 – 0.25)) + (0.25 * $428,942.50) = $332,986

Year 3 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 3) = ($301,000 * (1 – 0.25)) + (0.25 * $142,916.50) = $261,479

c. What is the additional Year 3- cash flow (i.e. after tax salvage and the return of working capital)?

Additional Year 3- cash flow = NWC recovered + After-tax Salvage Value = $19,000 + $485,877 = $504,877

d. If the project's cost of capital is 12%, should the machine be purchased?

This can be determined from the net present value (NPV) calculated as follows:

NPV = -$984,000 + ($306,159/1.12^1) + ($332,986/1.12^2) + ($261,479/1.12^3) + ($504,877/1.12^3) = $100,287.71

Since the NPV of the machine of $100,287.71 is positive, the machine should be purchased.

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2 years ago

Indicate whether each of the following is counted in the United States gross domestic product for the year 2006. Explain your an

iVinArrow [24]

The value of used textbooks sold through an online auction in 2006 is the gross domestic product for that year.

<h3 /><h3>Which of the following variables is used when computing GDP?</h3>

The calculation of a country's GDP takes into account both total private and public consumption, government spending, investments, increases in private inventories, paid-in building expenses, and the international balance of trade. (Imports are deducted from the total, while exports are added.)

<h3>What are the gross domestic product's four components?</h3>

The four primary parts of the gross domestic product are government spending, corporate investment, personal consumption, and net exports. 1 That tells what a country is best at producing. GDP is a measure of a country's annual total economic production.

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11 months ago

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his studen

Nady [450]

Answer:

Highly inelastic

Explanation:

Price elasticity of demand is a measure of the demand of a given service or commodity by utilizing it's price change. It can be calculated using the formula;

Price elasticity of demand=%change in quantity demanded/%change in price

%change in quantity demanded=((Final demand-Initial demand)/Initial demand)×100

((299-300)/300)×100=-0.33%

%change in price=12%

12%>0.33%

The change in price is larger than the change in demand, therefor the product is highly inelastic

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3 years ago

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

Sveta_85 [38]

Answer:

They all help explain the downsloping demand curve

Explanation:

The options to the question wasn't provided. The complete question can be in the attached image.

The demand curve slopes downward from left to right. This indicates that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

Income effect is a change in quantity demanded when real income change. Quantity demanded increases when real income increases and decreases when real income falls.

Substitution effect says that consumers would substituite to the consumption of a cheaper good when the price of a good originally consumed increases.

Diminishing marginal utility states that as consumption increases, utility derived from consumption falls and quantity demanded falls.

I hope my answer helps you

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3 years ago

If the current dividend (D0) is $3.00 and the growth rate is 6%. How much will the dividend be at Time 5?

katen-ka-za [31]

The dividend will be $4.015

<u>Explanation:</u>

The given data is: Initial dividend given is = $3 and growth rate given is = 6%

the following formula is used in order to calculate the dividend

dividend at time 5 = d0 multiply with (1+growth rate) power 5

= $3.00 multiply with (1+0.06) power 5

=>$3.00 multiply (1.33822558)

=>$4.015 (rounded to two decimals).

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3 years ago