Answer:
1. $19,300
2. Yes
Explanation:
1. The computation of relevant cost is shown below:-
= Unit-level materials + Unit-level labor + Unit-level overhead + Product level cost
= $5,800 + $6,400 + $3,900 + $3,200
= $19,300
Working note:-
Product level cost = $9,600 ÷ 3
= $3,200
2. Yes, Therefore Production is lower than buying cost, hence it is better to continue production.
Purchase price = 9,200 × $2.80
= $25,760
By using the FIFO Method the Closing inventory is $3,519. The cost of goods sold is $18,786. The sales revenue is $27,279, and the gross profit is $8,493.
Closing Inventory:
Ending inventory = 69 units * $51 (unit cost from the last purchase) = $3,519
Cost of Goods Sold:
The cost of goods sold will be the cost of the inventory that was sold during the year. Since the inventory is allocated based on the FIFO method, we start by using the units from the beginning inventory, then from the April 7 purchase, and finally from the July 16 purchase.
a. From the beginning inventory (53 units):
Cost of goods sold = 53 units * $45 (unit cost from the beginning inventory) = $2,385
b. From the April 7 purchase (133 units):
Cost of goods sold = 133 units * $47 (unit cost from the April 7 purchase) = $6,251
c. From the July 16 purchase (247 units):
Since the total number of units from the July 16 purchase (203 units) is greater than the remaining units needed (433 - 53 - 133 = 247 units), we will use all the units from this purchase.
Cost of goods sold = 203 units * $50 (unit cost from the July 16 purchase) = $10,150
Total cost of goods sold = $2,385 + $6,251 + $10,150 = $18,786
Sales Revenue:
Sales revenue = 433 units * $63 (selling price) = $27,279
Gross Profit:
Gross profit = Sales revenue - Cost of goods sold
Gross profit = $27,279 - $18,786 = $8,493
Therefore, using the FIFO method, the ending inventory is $3,519, the cost of goods sold is $18,786, the sales revenue is $27,279, and the gross profit is $8,493.
Learn more about the FIFO method here:
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Answer:
Company's contribution margin ratio is 70.59%
The contribution margin ratio for Sweet Treats is calculated by subtracting the variable cost per cone from the selling price per cone to get the contribution margin per cone. This is then divided by the selling price per cone to get the Contribution Margin Ratio, which is 70.59%.
To calculate the contribution margin ratio for Sweet Treats, we first need to determine the contribution margin per cone. This is done by subtracting the variable cost per cone ($1.25) from the selling price per cone ($4.25), which gives us a contribution margin of $3.00 per cone.
Then, the Contribution Margin Ratio is calculated by dividing the contribution margin per unit by the selling price per unit. In our case, the selling price per cone is $4.25 and our contribution margin per cone is $3.00. Therefore:
Contribution Margin Ratio = ($3.00/$4.25)×100% = 70.59%.
So, for Sweet Treats, the contribution margin ratio is 70.59%. This means that for each cone sold, 70.59% of the sales price is contributed to covering fixed costs after variable costs have been paid. Once the fixed costs are covered, the remaining amount goes into profit.
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Answer:
Break-even point (dollars)= $300,000
Explanation:
Giving the following information:
Variable cost ratio 80%
Total fixed costs $60,000
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
contribution margin ratio= 1 - 0.8= 0.2
Break-even point (dollars)= 60,000 / 0.2
Break-even point (dollars)= $300,000
What contract is it:
a. old social
b. new social?
Answer:
Old social contract
Explanation:
Old social contract is a type of contract that emphasises the long term commitment between the employer and the employee and stable conditions are defined for both parties.
New social contract on the other hand is one that is short term, and there is little commitment to the contract from both parties.
In the given scenario Gourd Supermarkets provides extensive training program for all new employees. They then spend a day in customer service and workplace safety training each year.
This shows a long term commitment, so it is a form of old social contract.
Answer: a. Old social contract
Explanation: this is an old social contract which is defined as one between an employee and the employer (organisation, business, company or firm) where the employee contributes his/her ability, education, loyalty, and commitment to the organization, and expect wages and benefits, work, advancement, and training in return. Thus, the old social contract emphasizes on long-term commitments with stable conditions between employers and employees. The old social contract is in direct contrast with the new social contract which exists between an employee and an organization wherein the employee takes personal responsibility for employability and the employer gives challenging assignments, lateral career moves, and creative development opportunities.
2. At 12/31/17, Peyton has $200 worth of merchandise on consignment at Bruno’s House of Bacon.
3. On 12/23/17, Peyton received a $1,000 deposit from Pet Globe for product to be shipped by Peyton in the second week of January.
4. On 12/03/2017, a mixer with cost of $2,000, accumulated depreciation $1,200, was destroyed by a forklift. As of 12/23/17, insurance company has agreed to pay $700 in January, 2018, for accidental destruction.
5. Note about later borrowing financials will show loan from parents repaid and use of bank financing.
PEYTON APPROVED
TRIAL BALANCE
As of December 31, 2017
Unadjusted trial balance Adjusting entries Adjusted trial balance
Dr Cr ref Dr Cr ref Dr Cr
Cash 67,520.04 67,520.04
Accounts Receivable 68,519.91 68,519.91
Other Receivable - Insurance Baking Supplies 15,506.70 15,506.70
Merchandise Inventory 1,238.07 1,238.07
Consignment Inventory Prepaid Rent 2,114.55 2,114.55
Prepaid Insurance 2,114.55 2,114.55
Misc. Supplies 170.49 170.49
Baking Equipment 14,000.00 14,000.00
Accumulated Depreciation 1,606.44 1,606.44
Customer Deposit - Accounts Payable 20,262.11 20,262.11
Wages Payable 3,383.28 3,383.28
Interest Payable 211.46 211.46
Notes Payable 5,000.00 5,000.00
Common Stock 20,000.00 20,000.00
Beginning Retained earnings 50,144.84 50,144.84
Dividends 105,000.00 105,000.00
Bakery Sales 327,322.55 327,322.55
Merchandise Sales 1,205.64 1,205.64
Cost of Goods Sold - Baked 105,834.29 105,834.29
Cost of Goods Sold - Merchandise 859.77 859.77
Rent Expense 24,549.19 24,549.19
Wages Expense 10,670.72 10,670.72
Misc. Supplies Expense 3,000.46 3,000.46
Business License Expense 2,045.77 2,045.77
Misc. Expense 1,363.84 1,363.84
Depreciation Expense 677.86 677.86
Insurance Expense 1,091.08 1,091.08
Advertising Expense 1,549.74 1,549.74
Interest Expense 818.31 818.31
Telephone Expense 490.98 490.98
Gain/Loss on disposal of equipment 429,136.32 429,136.32 - - 429,136.32 429,136.32
Answer:
PEYTON APPROVED
TRIAL BALANCE
As of December 31, 2017
Unadjusted Adjusting Adjusted
Trial balance Entries Trial balance
Dr Cr ref Dr Cr ref Dr Cr
Cash 67,520.04 3 1,000 68,520.04
Accounts Receivable 68,519.91 68,519.91
Other Receivable -
Insurance Baking
Supplies 15,506.70 15,506.70
Merchandise
Inventory 1,238.07 1 3,175 1 4,413.07
Consignment
Inventory 2 200 2 200
Prepaid Rent 2,114.55 2,114.55
Prepaid Insurance 2,114.55 2,114.55
Misc. Supplies 170.49 170.49
Baking Equipment 14,000.00 4 2,000 4 12,000.00
Accumulated Depreciation 1,606.44 4 4 406.44
Customer Deposit
- Accounts Payable 20,262.11 20,262.11
Wages Payable 3,383.28 3,383.28
Interest Payable 211.46 211.46
Notes Payable 5,000.00 5,000.00
Common Stock 20,000.00 20,000.00
Beginning Retained
earnings 50,144.84 50,144.84
Dividends 105,000.00 105,000.00
Bakery Sales 327,322.55 327,322.55
Merchandise Sales 1,205.64 1,205.64
Cost of Goods
Sold - Baked 105,834.29 105,834.29
Cost of Goods
Sold -
Merchandise 859.77 859.77
Rent Exp. 24,549.19 24,549.19
Wages Exp. 10,670.72 10,670.72
Misc. Supplies
Expense 3,000.46 3,000.46
Business
License
Expense 2,045.77 2,045.77
Misc.
Expense 1,363.84 1,363.84
Depreciation
Expense 677.86 677.86
Insurance
Expense 1,091.08 1,091.08
Advertising
Expense 1,549.74 1,549.74
Interest
Expense 818.31 818.31
Telephone
Expense 490.98 490.98
Gain/Loss on
disposal of equipment 429,136.32 429,136.32 - - 429,136.32 429,136.32
Explanation:
a) Data and Calculations:
PEYTON APPROVED
TRIAL BALANCE
As of December 31, 2017
Unadjusted trial balance Adjusting entries Adjusted trial balance
Dr Cr ref Dr Cr ref Dr Cr
Cash 67,520.04 67,520.04
Accounts Receivable 68,519.91 68,519.91
Other Receivable - Insurance Baking Supplies 15,506.70 15,506.70
Merchandise Inventory 1,238.07 1,238.07
Consignment Inventory Prepaid Rent 2,114.55 2,114.55
Prepaid Insurance 2,114.55 2,114.55
Misc. Supplies 170.49 170.49
Baking Equipment 14,000.00 14,000.00
Accumulated Depreciation 1,606.44 1,606.44
Customer Deposit - Accounts Payable 20,262.11 20,262.11
Wages Payable 3,383.28 3,383.28
Interest Payable 211.46 211.46
Notes Payable 5,000.00 5,000.00
Common Stock 20,000.00 20,000.00
Beginning Retained earnings 50,144.84 50,144.84
Dividends 105,000.00 105,000.00
Bakery Sales 327,322.55 327,322.55
Merchandise Sales 1,205.64 1,205.64
Cost of Goods Sold - Baked 105,834.29 105,834.29
Cost of Goods Sold - Merchandise 859.77 859.77
Rent Expense 24,549.19 24,549.19
Wages Expense 10,670.72 10,670.72
Misc. Supplies Expense 3,000.46 3,000.46
Business License Expense 2,045.77 2,045.77
Misc. Expense 1,363.84 1,363.84
Depreciation Expense 677.86 677.86
Insurance Expense 1,091.08 1,091.08
Advertising Expense 1,549.74 1,549.74
Interest Expense 818.31 818.31
Telephone Expense 490.98 490.98
Gain/Loss on disposal of equipment 429,136.32 429,136.32 - - 429,136.32 429,136.32
b) The adjustments are made in the Adjusting entries column and referenced accordingly, while the effect is reflected in the adjusted trial balance column.
Answer:
1. Which firm has a greater FCF (free cash flow)?
2. What is firm A’s (annual) tax shield?
3. What is firm B’s (annual) tax shield?
Explanation:
since firm A's debt is $20, its value is $100, then its equity = $80
since firm B's debt is $80, its value is $100, then its equity = $20
Firm A's cash flow = (EBIT - interest expense) x (1 - tax rate) = [$10 - ($20 x 10%)] x 0.6 = $4.80
Firm B's cash flow = (EBIT - interest expense) x (1 - tax rate) = [$10 - ($80 x 10%)] x 0.6 = $1.20
Firm A's annual tax shield = taxable interest x tax rate = ($20 x 10%) x 40% = $0.80
Firm B's annual tax shield = taxable interest x tax rate = ($80 x 10%) x 40% = $3.20
Firm B has a greater FCF compared to Firm A. Firm A has a tax shield of $0, and Firm B has a tax shield of $3.2.
1. Firm B has a greater Free Cash Flow (FCF) compared to Firm A. FCF is calculated as EBIT(1-TC) + TC(D-RD), and in this case, Firm B has a higher outstanding debt which leads to a higher tax shield, resulting in a greater FCF for Firm B.
2. Firm A's annual tax shield can be calculated by subtracting the debt payments from the earnings before interest and taxes (EBIT) and then multiplying the result by the tax rate. In this case, the annual tax shield for Firm A is $0, as the interest expense is greater than the taxable income.
3. Firm B's annual tax shield can be calculated in the same way as Firm A's. In this case, the annual tax shield for Firm B is $3.2. This is because the debt payments are lower than the taxable income and result in a tax shield.
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