Answer:
D. decreasing returns to scale.
The answer and procedures of the exercise are attached in the image below.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Year 2 Year 3
Amounts billed to customers for services rendered $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services rendered during the year 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
In addition, you learn that the company incurred advertising costs of $24,000 in year 2, owed the advertising agency $4,900 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.
Answer:
RPG Company
1. Accrual Net Income for Year 2 and Year 3:
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Expenses:
Rent 38,500 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 24,000 16,600
Net Income $93,500 $170,900
2. Determination of the liability for Advertising:
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Explanation:
a) Data and Calculations:
RPG Company.
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
Year 2 Year 3
Service Revenue: $ 320,000 $ 420,000
Accounts Receivable
Service revenue $320,000
Cash collected 230,000
Balance Year 2 $90,000
Service revenue 420,000
Cash collected 370,000
Balance Year 3 $50,000
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Year 3 = 16,600
Cash paid 32,000
Balance 0
The accrual net income for RPG Company in Year 2 is $55,000, and in Year 3 is $194,000. The amount due to the advertising agency shown as a liability on RPG's balance sheet at the end of Year 2 is $0, as it was completely paid off in that year.
In order to calculate the accrual net income and determine the liability of the advertising agency, we first need to correctly account for all the incomes and expenses. Here's how it works:
Accrual net income is calculated as revenues (Amounts billed to customers) minus expenses. For year 2, the expenses include Payments of rent, Salaries paid, Travel and entertainment, and Advertising costs. For year 3, as there was no rent payment and no liabilities at the end of the year, we deduct only the Salaries paid, Travel and entertainment, and Advertising costs from the revenues.
Revenues
Year 2: $320,000
Year 3: $420,000
Expenses
Year 2: Rent($77,000) + Salary($137,000) + Travel & Entertainment($27,000) + Advertising($24,000) = $265,000
Year 3: Salary($157,000) + Travel & Entertainment($37,000) + Advertising($32,000) = $226,000
Accrual Net Income
Year 2: $320,000 - $265,000 = $55,000
Year 3: $420,000 - $226,000 = $194,000
The amount owed to the advertising agency that should be considered as a liability at the end of year 2 can be figured out by taking into account the advertising expenses incurred in year 2 and the previous year's outstanding. But since we learn that there were no liabilities at the end of year 3, the outstanding $4,900 at the end of year 1 must be paid in year 2 along with the incurred cost of $24,000. Therefore, the liability at the end of year 2 would be $0.
#SPJ3
Direct labor $ 42,000
Manufacturing overhead $ 19,000
Selling expenses $ 22,000
Administrative expenses $ 35,000
1) What is the total amount of product costs?
2) What is the total amount of period costs?
3) What is the total amount of conversion costs?
4) What is the total amount of prime costs?
The total product cost is $141,000, total period cost is $57,000, total conversion cost is $61,000, and the total prime cost is $122,000.
In business terms, costs and expenses are categorized differently. The product costs are the costs involved directly in manufacturing a product, which include direct materials, direct labor, and manufacturing overhead. Therefore, the total product cost would be $80,000 (direct materials) + $42,000 (direct labor) + $19,000 (manufacturing overhead) = $141,000.
On the other hand, period costs are the costs that are not directly tied to a product, like selling and administrative expenses. Therefore, the total period cost is $22,000 (selling expenses) + $35,000 (administrative expenses) = $57,000.
Conversion costs are the costs of converting the raw materials into a finished product, these are direct labor and manufacturing overhead. So the conversion cost is = $42,000 (direct labor) + $19,000 (manufacturing overhead) = $61,000. The prime costs refer to the direct costs of production, these are direct materials and direct labor, prime cost = $80,000 (direct materials) + $42,000 (direct labor) = $122,000.
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Markdown policy
Going-rate policy
Penetration policy
Answer:
The correct answer is letter "D": Penetration policy.
Explanation:
Penetration pricing refers to a strategy by which firms introduce their products at a price lower than the average in the market in an attempt of attracting the greater quantity of consumers possible and wiping out competitors. After the competition is removed, the entity plans to set the price of its good higher since it has the control of the market now assuming customers would not have found a substitute.
b. A $20 bill
c. A bond issued by a publicly traded company
d. Your car
Required:
Write down the assets in order of their liquidity, from most liquid to least liquid.
Answer:
1. A $20 bill
2. A bond issued by a publicly traded company
3. The funds in a money market account
4. Your car
Explanation:
Liquidity means that how easily an asset can be converted into cash.
1. Currency is the most liquid means of medium of exchange, so $20 bill is highly liquid asset.
2. A publicly traded bond can be converted into cash within a couple of days, so it is second most liquid asset.
3. The funds invested in the money market can be withdrawn within agreed period of time which can be in months or days so it can be at seconf or third most liquid asset.
4. A car can take more than a month to locate a customer to sell it at appropriate price so it is the least liquid asset.
The order of liquidity, from most liquid to least liquid, is: funds in a money market account, a $20 bill, a bond issued by a publicly traded company, and your car.
In order of liquidity, from most liquid to least liquid, the assets would be:
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b. $128 per unit
c. $63 per unit
d. $149 per unit
Answer:
unitary absorption production cost= $128
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
First, we need to calculate the unitary fixed manufacturing overhead:
Unitary fixed overhead= 441,000 / 7,000= $63
Now, the unitary absorption production cost:
unitary absorption production cost= 51 + 12 + 2 + 63
unitary absorption production cost= $128
(B) lower than it was in short-run equilibrium but higher than it was originally (before aggregate demand increased).
(C) lower than it was originally (before aggregate demand increased).
(D) equal to what it was originally (before aggregate demand increased).
Answer:
The answer is (A) higher than it was in short-run equilibrium.
Explanation: