BUSINESS COLLEGE

Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign wholesaler offers to buy 5,400 units at $30 each. Maize will incur additional costs of $3 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity.

Answers

Answer 1
Answer:

Answer:

$37,800.00

Explanation:

Maize Company cost structure is such that $20 out of the $35 is a variable cost and the balance of $15 is a fixed cost.

So the fixed cost will always be incurred whether or the special order is accepted.

So he relevant cost of accept the special order from the foreign wholesaler

is the relevant variable cost which is the variable cost of production and the additional print logo cost

Also remember that whether or not the order is accepted the fixed cost will still be incurred and besides Maize still has excess capacity

A relevant variable cost is the future cash cost that would be incurred as a result of producing and selling a unit of the product.

Relevant cost =  $20 + $3

                   = $23

The increase in net income = (selling price - relevant cost)× unit sold

=( $30 - $23 ) × 5,400

$37,800.00

Related Questions

I am having a diffiucult time figuring out the advertising expense. I have plugged in several solutions and they are all incorrect.Listed below are several transactions that took place during the second and third years of operations for RPG Company.Year 2 Year 3Amounts 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.
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A 15-year annuity pays $1,300 per month, and payments are made at the end of each month. The interest rate is 10 percent compounded monthly for the first six years and 8 percent compounded monthly thereafter. What is the present value of the annuity
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Private saving refers to ________. A) disposable income minus consumption expenditure B) total expenditure minus purchases of capital goods C) taxes plus consumption minus income D) consumption expenditure divided by disposable income E) none of the above

Answers

Answer:

disposable income minus consumption expenditure

Explanation:

FFDP Corp. has yearly sales of $29.8 million and costs of $15.5 million. The company’s balance sheet shows debt of $55.8 million and cash of $39.8 million. There are 1,960,000 shares outstanding and the industry EV/EBITDA multiple is 9.3. What is the company’s enterprise value? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) What is the stock price per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answers

Answer:

$59.68 million per share

Explanation:

The computation of stock price per share is shown below:-

Earnings Before Interest , depreciation, taxes and amortization (EBITDA) = Sales - Cost

= $29.8 million - $15.5 million

= $14.3 million

Enterprise Value ÷ EBITDA = 9.3

Hence, Enterprise Value = EBITDA × 9.3

= $14.3 million × 9.3

= $132.99 million

Enterprise Value = Value of Equity + Debt - Cash

or Value of Equity = $132.99 million - $55.8 million + $39.8 million

= $116.99 million

Now,

Stock Price Per share = Value of Equity ÷ Number of Shares Outstanding

= $116.99 million ÷ 1,960,000

= $59.68 million per share

Final answer:

The company's Enterprise Value (EV) is $132,990,000 and the stock price per share is $60.20. The EV was calculated by multiplying the firm's EBITDA ($14.3 million) by the industry EV/EBITDA multiple (9.3). The stock price per share was determined by dividing the Market Capitalization ($117,990,000) by the shares outstanding (1,960,000).

Explanation:

To respond your question, we first need to calculate the company’s Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA). In this case, since only sales and costs are given, let's assume that EBITDA is the company’s sales minus costs. Therefore, EBITDA = $29.8 million - $15.5 million = $14.3 million. Secondly, the Enterprise Value (EV) is determined as the product of the company’s EBITDA and the industry EV/EBITDA multiple. EV = $14.3 million * 9.3 = $132.99 million. But keep in mind to enter your answer in dollars, not millions of dollars. So, the EV = $132,990,000.

To calculate the stock price per share, we must first calculate the Market Capitalization of the company. The Market Capitalization is the EV minus the net debt (which is the company's debt minus the cash). Market Capitalization = EV - (Debt - Cash) = $132,990,000 - ($55,800,000 - $39,800,000) = $117,990,000.

Lastly, we get the stock price per share by dividing the Market Capitalization by the number of shares outstanding. Stock price per share = $117,990,000 / 1,960,000 shares = $60.20. So, the stock price per share would be $60.20 returned to 2 decimal places.

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Budgeted production needs are determined by: A. adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. B. adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. C. adding budgeted sales in units to the desired ending inventory in units. D. deducting the beginning inventory in units from budgeted sales in units.

Answers

Answer: Option (A) is correct.

Explanation:

The budgeted production determines the number of units that should be produced. It is derived from the combination of two components i.e. sales forecast and finished goods inventory in hand.

Budgeted production:

= Budgeted sales in units + Desired ending inventory in units - Beginning inventory in units

Answer:

The correct option is A. dding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total

Explanation:

The formula to computed the budgeted production is shown below:

= Ending inventory in units + Budgeted sales in units - Beginning inventory in units.

where,

Ending inventory is the inventory which is left at the end of the year or we can say the closing stock of inventory

Budgeted sales are the sales which is to be sell in the future

Beginning inventory is that inventory which shows at the starting of the year or we can say opening stock of inventory

Therefore, the remaining options are incorrect.

So, the correct option is A. dding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total

A company purchased a building for $850,000 on January 1, 2010. As of December 31, 2014, $200,000 of accumulated depreciation had been recorded related to this building. The building was sold to another party for $1,250,000 on January 1, 2015. On the sale of this building, the company should recognize:

Answers

Answer: Gain of $600,000

Explanation: As we know that :-

Gain / loss = Sales value - Cost of building

Now, we can compute cost of building on date of sale as follows :-

cost = purchase date cost - accumulated depreciation

        = $850,000 - $ 200,000

        = $650,000

putting the values into initial equation we get :-

Gain = $1,250,000 - $650,000

        = $600,000

Avon was known as the company that sold cosmetics door-to-door for a long time. In order to grow and reach new markets it began to sell jewelry through its door-to-door sales force. This involved marketing new products through existing channels of distribution. It also is now selling its products by mail order and has opened retail stores. Avon is an example of a company effectively using which strategy? A. product development strategy
B. diversification strategy
C. market penetration strategy

Answers

the answe is deffffffffff a

Final answer:

Avon is effectively using the diversification strategy by expanding its product offerings and distribution channels.

Explanation:

Avon is an example of a company effectively using the diversification strategy. Diversification involves entering new markets or offering new products to reach a broader range of customers. Avon expanded its product offerings from cosmetics to jewelry and adopted various distribution channels such as door-to-door sales, mail order, and retail stores to reach different customer segments.

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Select a company of your choice. Assume that your firm is considering whether to make a component in-house or to outsource it to an independent foreign supplier. Manufacturing the part in-house will require an investment in specialized assets; quality control and the protection of intellectual property rights are major concerns. The most efficient and reliable suppliers are located in countries whose currencies many foreign exchange analysts expect will appreciate in the next decade; likewise, wage rates in those countries are expected to rise. Discuss the pros and cons of manufacturing the component in-house as opposed to outsourcing it. Should the firm consider foreign direct investment as one of its strategies?

Answers

Answer:

The airline company is considering buying the aircraft components in house or outsourcing it from other foreign countries.  

Explanation:

A company can outsource the product manufacturing or can manufacture its own products. The manufacturing of a product in house will be according to the requirements and customization can be done but on the other hand it will require equipment and manufacturing line setup on the site which incurs heavy cost. Buying product from outside will save incurring heavy fixed costs.

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