Upon assessing the costs of adding new suppliers and potential losses from a super-event, Phillip Witt of Witt Input Devices should manage three suppliers. Each supplier acts as an insurance against the super-event, with the cost to manage a new supplier being less than the potential loss from a super-event.
In this scenario, the president of Witt Input Devices, Phillip Witt, should consider the cost of adding a supplier against the potential risk of having them all shut down, causing a significant loss. The disadvantage of getting a new supplier is the marginal cost, which is $14,800. On the other hand, the potential loss that the firm could suffer in the event of a super-event is $480,000.
To solve this scenario, you need to consider each supplier as a form of insurance against the super-event. By looking at the probability of the super-event, we can obtain the expected loss per year which is 3% of $480,000 (0.03 * 480000 = $14,400).
Considering all factors, it appears that it would be economically feasible for Phillip Witt to manage three suppliers because the expected potential loss is less than the expense of adding a new supplier. Therefore, his best strategy is to maintain all three suppliers to minimize the overall risk.
#SPJ12
To minimize costs, Witt Input Devices should consider the likelihood of a total shutdown and the cost of managing additional suppliers. By calculating the expected cost for different numbers of suppliers, we can determine the optimal number that minimizes costs. This decision depends on the specific probabilities and costs involved.
To determine the number of suppliers that Witt Input Devices should use, we need to consider the likelihood of a total shutdown due to a 'super-event' and the cost of managing additional suppliers. According to the given information, there is a 3% probability in any year of a 'super-event' shutting down all suppliers for at least 2 weeks, resulting in a cost of $480,000. The 'unique-event' risk for any individual supplier is 5%. To minimize the overall costs, we should calculate the optimal number of suppliers by comparing the cost of managing additional suppliers to the potential losses from a shutdown.
The marginal cost of managing an additional supplier is $14,800 per year. Let's assume that Witt Input Devices can choose up to three nearly identical local suppliers, and we need to find the ideal number of suppliers for minimizing costs. We can start with one supplier and calculate the expected cost. If there is a 'super-event,' the cost will be $480,000. If there is no 'super-event,' the cost will be the annual cost of managing one supplier, which is $14,800.
Next, we can calculate the expected cost for two suppliers. The probability of both suppliers being shut down due to a 'super-event' is the square of the individual risk, which is (0.03)^2 = 0.0009. The cost would then be $480,000. The probability of only one supplier being shut down is calculated as the sum of the probability of exactly one supplier being shut down multiplied by the probability of the other supplier not being shut down. This comes out to be 2 * (0.03) * (0.97) = 0.0582. In this case, the cost would be 2 * $14,800 = $29,600. Finally, the probability of both suppliers being operational is (0.97)^2 = 0.9409, resulting in a cost of 2 * $14,800 = $29,600. Therefore, the expected cost with two suppliers is 0.0009 * $480,000 + 0.0582 * $29,600 + 0.9409 * $29,600.
We can extend this calculation to find the expected cost for three suppliers. The probabilities of all three suppliers being shut down, two suppliers being shut down and one supplier being operational, and one supplier being shut down and two suppliers being operational can be calculated using the same approach. The expected cost in this case will be 0.0009 * $480,000 + 0.0582 * $29,600 + 0.0582 * $29,600 + 0.9409 * $29,600.
By comparing the expected costs for each number of suppliers, we can determine the optimal number of suppliers that minimizes costs. The answer will be the number of suppliers with the lowest expected cost. The result will depend on the specific values of the probabilities and costs involved.
#SPJ2
Answer:
The Earnings after taxes will be $400,000
Explanation:
According to the data we have the following Long term financing funds of Permanent current assets = $1,610,000 and Fixed assets = $790,000 so the total of Long term financing funds= $ 2,400,000
Also, we have Termperory current assets = $3,200,000
Therefore, the Long term interest expenses = $2,400,000 * 15%
= $360,000
and the Short term interest expenses = $3,200,000* 10%
= $ 320,000
Hence, Total interest expenses=$360,000+$ 320,000=$680,000
So, Earnings before taxes=Earnings before interest and taxes-Interest expenses=$ 1,180,000- $ 680,000=$500,000
The tax rate is 20 percent, hence, taxes=$500,000*20%=$100,000
Therefore, The Earnings after taxes would be=Earnings before taxes-taxes
=$500,000-$100,000
=$400,000
Answer:
e. Affiliative selling relationship
Explanation:
In an affiliative selling relationship, the buyer needs the information related to the product which helps the buyer to buy the product. The buyer trust on the seller with a view to satisfy his expectations
This relationship fully depends upon the trust which results in the best purchasing decision.
By maintaining the trust, the seller increase its sales which helps him to achieve its sales target
$'000
Net sales $1,230
Cost of goods sold $520
Operating expenses $440
Net income $390
Balance sheet data:
$'000
Average total equity $2,400
Average total assets $4,000
Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share.
At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $88 per share.
Required:
Compute the following:
a). Gross profit rate
b). Supreme's operating income (in millions)
c). Return on assets
d). Return on equity
e). Price-earning ratio
Answer:
a. Gross profit rate = Gross profit / sales
= $710,000 * 100
$1,230,000
= 57.72%
b. Supreme Operating Income
Gross Profit $710,000
Operating expenses (440,000)
Operating Profit 270,000
c. Return on Asset = Return/ Average Asset
= $390,000 * 100
$4,000,000
= 9.75%
d. Return on equity = Return / Average equity
= $390,000 * 100
$2,400,000
= 16.25%
e. Price-earnings ratio = Market price per share / earnings per share
= $88/ $4
= 22
Explanation:
Computation of Gross profit
$'000
Net Sales 1,230
Cost of goods sold (520)
Gross Profit 710
b. Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000.
c. Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000.
d. Debit Factory Overhead $5,000; credit Work in Process Inventory $5,000.
e. Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000.
Answer:
the correct answer is
b. Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000.
good luck
Answer:
Explanation:
2018 Financial Statement
Income Statement :
Amount of recognized revenue = 3/12 * $54,000
Cr Income statement $13,500
Dr Cash/ Bank Account $13,500
Balance Sheet :
Dr. Bank Account -$54,000
Cr Retained earning -$13,500
Cr Deferred Income -$40,500
Statement of Cash Flow :
Cr Operating income $13,500
Cr Increase in payable(deferred income) $40,500
Revenue to Recognize in 2019
Cr Income Statement $40,500
Dr. Deferred Income $40,500
Answer:
The current value of the stock is $3.63
Explanation:
The company's management does not expect to increase its dividend in the foreseeable future. It means that the dividend for this years (to be received after 1 years from today) is also $4.24
Future value (FV): $4.25
Rate: 17%
Present value (PV) = FV/(1+rate)^tenor
= 4.25/(1+17%) = $3.63