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Soloha48 [4]
3 years ago
13

Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 3.0% in thi

s and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $163,508,343. Assuming similar sales next year, the 3.0% increase in demand will provide $4,905,250 of additional revenue. With the overall contribution margin of 34.1%, after direct costs this revenue will add $1,672,690 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?
TQM investment will not have a significant financial impact

a. 14 months
b. 5 months
c. 10 months
Business
1 answer:
Wittaler [7]3 years ago
7 0

Answer:

Option (a) is correct answer (14 Months)

Explanation:

Given data

Investing in TQM = $2,000,000

Minimum rise in demand = 3.0 %

Last year’s sales = $163,508,343

As per the given data next year sales is increased by 3.0%. So, 3.0% of last year sales

=> 0.03 × $163,508,343 = $4,905,250.29 ~= $4,905,250

Income added to the bottom line = 34.1% of increased demand

=> 0.341 × $4,905,250 = $1,672,690.25~= $1,672,690

Payback on the initial $2,000,000 TQM investment can be attained in a period and can be computed by using the formula

=> (Investment in TQM / Revenue added to the bottom line) × 12

=> ($2,000,000 / $1,672,690) ×12 = 14.34 ~ = 14 Months

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Answer: a. Dr Interest expense  $341.67

                   Cr    Accrued Interest Liability   $341.67.

b. Total Amount of Current Liabilities = $72741.67

Explanation:

Accrued Interest on notes Payable

The Note was issued on 1 September 2018, note Payable is $20500 interest interest will be incurred from the Month of September to February because the Note will be settled on 1 March 2019, How ever The year ended on the 31st of December (current financial period) which means Ozark Sales Company incurred interest for 4 months in the current year (1 September to 31 December 2018).

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Journal Entry

Dr Interest expense  $341.67

Cr         Accrued Interest Liability   $341.67.

Current Liabilities

Ozark Sales current liabilities include Purchased equipment inventory, Accrued Interest expense incurred on the Notes Payable and the Notes Payable amount. Ozark Sales Made a Payment of $125100, this payment was made to settle some of the total current liabilities.

The total Current Liabilities (The Balance) on 31 December 2018 will include all transactions mentioned about and the payment of $125100 will be subtracted. The Balance will the amount that will be reflected in the Balance sheet for Current Assets

Purchased Equipment inventory = $177 000

Notes Payable = $20500

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Accounts Payable Payment  = $125100

Total Amount of Current Liabilities = $177 000 + $20500 + $341.67 - $125100

Total Amount of Current Liabilities = $72741.67

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