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wlad13 [49]
3 years ago
8

A company is experiencing lower than expected sales. The company’s executives agreed that in order to make up some of the lost r

evenue’s impact on the bottom line, expenses must be lower. One of the expenses to reduce was equipment that was purchased for $4,400,000 two years ago and which was estimated to have a useful life of eight years and a salvage value of $400,000. The company uses straight line deprecation, therefore, the company has recorded accumulated depreciation of $1,000,000 to date.
The executives want the estimated useful life changed from eight to 12 years so that depreciation expense will be reduced. The argument is that the useful life was just an estimate and by changing it the company can be aligned with the industry since some competitors in the industry also use 12 years’ useful life.

Identify the stakeholders in the case.

Determine whether the proposed change in assets’ useful life is unethical or good business practice.

Determine the effects of executives’ proposed changes on the income before taxes for the year of proposed change.

State what you would do if you were in charge of making the change.
Business
1 answer:
kicyunya [14]3 years ago
5 0

Answer:

a) The Common stockholder are the stakeholders

b) It is good business practice and ethical

c) $200,000 increase in income before tax

d) Advise the stakeholders based on the calculations made and effect on profit before tax.

Explanation:

The Question is divided into 4 parts and each will be answered as follows

<u>a) Identify the stakeholders in the case:</u> The stakeholders in such a case are the common stock holders.

The objective of any organization as well as its board of executives is to maximize the wealth of the stakeholders or shareholders. As such, any drag in sales will impact profit and lower profit means lower dividend or interest for stakeholders. Any decision taken therefore, will affect the common stock holders the most.  

b) <u>Determine whether the proposed change in assets’ useful life is unethical or good business practice? </u>

The ethical nature of the proposed change in assets' useful life is based on how it affects industry practice

Since, its proposal will lead to the company's alignment with industry standard and practices, it means it is ethical and in line with good business practice  

Furthermore, since it will lead to an increase in the company's dragging profits, then the common stock holders and every other stakeholder in the organization will have restored confidence in the company. Hence, it is both ethical and good business practice.  

c<u>) Determine the effects of executives’ proposed changes on the income before taxes for the year of proposed change? </u>

Initial Depreciation/year ($4,400,000-$400,000)/ 8 $500,000

The proposed Depreciation ($300,000)

($4,400,000-$1,000,000-$400,000)= $3,000,000

$3,000,000/ (12 -2 years)= $300,000

The difference $200,000

This difference represents an increase in income before tax is deducted

d)<u> State what you would do if you were in charge of making the change. </u>

I will primarily advise the stakeholders based on the options available as follows:

If profitability is paramount, in order to ensure that stakeholders enjoy maximized wealth then, we should take the decision to change the depreciation estimates.  

Of course, there is also the need to remind everyone that the increase in income before tax also leads to an increase in tax.

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Planning is the management process that Pedro is using.

Answer: Option A.

<u>Explanation:</u>

Management process is the process that has certain steps and procedures in it that a business organisation needs to follow to achieve the goals of the organisation and for the betterment of the business organisation for which the employers are working.

The various steps and procedures of the management process are planning, organizing, managing, leading, controlling and so on. Planning is the management process in which all the resources needed to achieve the organisational goals are planned and there is proper thinking before acting to achieve the goals.

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3 years ago
Instead of assigning access for each user account individually, ________ is a more efficient and easier-to-manage approach. Cent
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Answer:

Role-Based Access Control (RBAC)

Explanation:

Instead of assigning access for each user account individually, Role-Based Access Control (RBAC) is a more efficient and easier-to-manage approach.

In computer systems security, role-based access control or role-based security is an approach to restricting system access to authorized users. <u>It is used by the majority of enterprises with more than 500 employees,</u> and can implement mandatory access control or discretionary access control.

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4 0
3 years ago
A liquid company produces hand sanitizer which has demand of 300,000 units per year.
jarptica [38.1K]

Answer:

EOQ =   =  15,491.93 units

Optimal order interval   18.8 days   (19.36  orders in year)

Total cost = $150,774.60

Explanation:

<em>The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost.</em>

It is computed using he formulae below

EOQ = √ (2× Co× D)/Ch

<em>Co- ordering cost per order- 20, </em>

<em>Ch -Holding cost per unit per annum- 10%× $0.5=  0.05</em>

<em>Annual demand: D- 300,000</em>

EOQ = √(2× 20 * 2,580)/(10%× 0.5)

       =  15,491.93 units

Assuming 365 days, the optimal order interval in dates

Number of orders per year

= annual demand/EOQ

= 300,000/ 15,491.93

= 19.36 times

<u><em>in days:</em></u>

= EOQ/300,000 × 365 days

=   (15,491.93/ 300,000) × 365 days

= 18.8 days

Total annual cost =

<em>Total cost Purchase cost + Carrying cost + ordering cost </em>

                                                                                 $

Purchase cost = $0.5 × 300,000 =              150,000

Carrying cost = (15,491.93/2) * 10%*0.5 =       387.29

Ordering cost = (300,000/15,491.93 ) × 20 = <u>387.29</u>

Total cost                                                      1<u>50,774.60</u><u> </u>

       

5 0
3 years ago
an Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions f
irinina [24]

Answer:

Part 1 - ROI

In terms of Margin :

Division Osaka  = 20 %

Division Yokohama  = 14 %

In terms of Turnover :

Division Osaka  = 400 %

Division Yokohama = 200 %

Part 2 - Residual Income

Division Osaka = $182,000

Division Yokohama  = $210,000

Explanation:

<em>Return on investment (ROI) = Divisional Profit Contribution / Assets Employed in the division x 100</em>

In terms of Margin :

Division Osaka = $ 455,000 / $ 2,275,000 x 100 = 20 %

Division Yokohama = $ 1,470,000/ $ 10,500,000 x 100 = 14 %

In terms of Turnover :

Division Osaka = $ 9,100,000 / $ 2,275,000 x 100 = 400 %

Division Yokohama = $ 21,000,000/ $ 10,500,000 x 100 = 200 %

<em>Residual income = Controllable Profit - Cost of Capital Charge on Controllable Investment</em>

Therefore,

Division Osaka = $ 455,000 - $ 2,275,000 x 12 % = $182,000

Division Yokohama = $ 1,470,000  - $ 10,500,000 x 12 % = $210,000

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Answer and Explanation:

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(Check the attachment below for the computation of Whispering’s weighted-average accumulated expenditures for interest capitalization purposes.)

Therefore, Whispering's weighted-average accumulated expenditures for interest capitalization purposes is $2,334,000.

4 0
3 years ago
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