BUSINESS COLLEGE

Wren Pork Company uses the relative market value method/Value basis method of allocating joint costs in its production of pork products. Relevant information for the current period follows:Product Pounds Price/lb.
Loin chops 3,080 $5.40
Ground 10,200 2.20
Ribs 4,120 5.05
Bacon 6,160 3.70
The total joint cost for the current period was $45,400. How much of this cost should Wren Pork allocate to Loin chops?
A. $0.
B. $6,443.
C. $9,134.
D. $11,350.
E. $45,400.

Answers

Answer 1

Answer:

Answer:

C. $9,134

Explanation:

Product Pounds Price/Ib Total Value

Loin chops 3,080 $5.40 $16,632

Ground 10,200 $2.20 $22,440

Ribs 4,120 $5.05 $20,806

Bacon 6,160 $3.70 $22,792

$82,670

The Total Joint cost = $45,400

Hence Joint cost to Lopin chops = $45,400 * $16,632 / $82,670

Joint cost to Lopin chops = $9,134

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The price of a stock is $64. A trader buys 1 put option contract on the stock with a strike price of $60 when the option price is $10. The trader makes a profit when the stock price is below _______________

Answers

Answer:

stock price is below $50

Explanation:

given data

price of a stock = $64

strike price = $60

option price = $10

solution

we know here that stock sell for $60 and pay for $10

so that here price of stock is

stock price = $60 - $ 10

stock price = $50

and net profit will be

net profit = $10 - $10

net profit = 0

so that we can say stock price is less than $50 for trader for making profit 0 or greater than 0.

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Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then __________________ has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then ___________________________.

Answers

A) No market failure; market failure has occurred.

B) Market failure; no market failure has occurred.

C) No market failure; there will still be no market failure.

D) Market failure; there will still be market failure.

Answer:

The correct answer is A)

Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then No Market Failure has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then Occurred

Explanation:

Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market.

Reasons for market failure include: positive and negative externalities, environmental concerns, lack of public goods, under provision of merit goods, over provision of demerit goods, and abuse of monopoly power.

In the question above, we see that at first there is a substandard good but people stick to it because it cost much more to switch than to enjoy the utility derivable from the good. This is logical. So there the forces of the market (price, demand and supply) are functional by themselves.

On the other hand, the cost of switching falls below the value of the benefit derivable. Logically, because it is an inferior good, people ought to switch because there is a better alternative. However because the market stays same, it means that the forces have failed to adjust accordingly.

Cheers!

Bridge Building Company estimates that it will incur $1,200,000 in overhead costs for the year. Additionally, the company estimates 50,000 direct labor hours will be spent building custom walking bridges for the year at a total direct labor cost of $600,000. What is the predetermined overhead rate for Bridge Building Company if direct labor costs are to be used as an allocation base?

Answers

Answer:

Predetermined manufacturing overhead rate= $2 per direct labor dollar

Explanation:

Giving the following information:

Estimated overhead cost= $1,200,000

Estimated direct labor cost= $600,000.

To calculate the predetermined overhead rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 1,200,000 / 600,000

Predetermined manufacturing overhead rate= $2 per direct labor dollar

Final answer:

The predetermined overhead rate of Bridge Building Company is 2, which is calculated by dividing the overhead costs by the direct labor costs. This signifies that for every dollar of direct labor cost, the company allocates two dollars to overhead costs.

Explanation:

The predetermined overhead rate of the Bridge Building Company can be calculated by dividing the total estimated overhead costs by the total estimated direct labor costs as follows:

Overhead costs = $1,200,000
Direct labor costs = $600,000
Predetermined overhead rate = Overhead costs / Direct labor costs
Therefore, the predetermined overhead rate = $1,200,000 / $600,000 = 2

This means that for every dollar of direct labor cost, the Bridge Building Company allocates two dollars to overhead costs. This rate is used as the allocation base for their overhead.

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Zap Power Company pays an annual dividend on its preferred stock of $4.54 per share. The investors have an 8% required rate of return. What is the price of the stock

Answers

Answer:

The price of the stock is $56.75.

Explanation:

This can be calculated using the following formula:

P = d /r ……………………………………… (1)

Where;

P = price of the stock = ?

d = preferred stock dividend = $4.54

r = required rate of return = 8%, or 0.08

Substituting the values into equation (1), we have:

P = $4.54 / 0.08

P = $56.75

Therefore, the price of the stock is $56.75.

You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. A regression of stock returns against the local market index yields a beta of 1.10, but the firm is 15% of the index. You have collected the average betas for global companies in each of the sectors, as well as the average debt equity ratios in each sector: Setor Average Regression Beta Average D/E ratio
Steel 1.18 30%
Financial
Services 1.14 70%
The average tax rate for these industries is 40%.
In the most recent period, the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. The firm also had a debt/equity ratio of 150%, and a tax rate of 30%. Estimate the levered beta for the company.

Answers

Answer:

The levered beta for the company is 1.93.

Explanation:

Levered beta for the company = (Weight of steel business*levered beta of steel business) + (Weight of financial services business*levered beta of financial services business)

Levered beta of steel business = Unlevered beta of steel sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)

levered beta of financial services business = Unlevered beta of financial services sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)

Unlevered beta of steel sector = Current beta of steel sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)

Unlevered beta of steel sector = 1.18/[1+((1-0.4)*0.3)]

Unlevered beta of steel sector = 1.18/[1+(0.6*0.3)]

Unlevered beta of steel sector = 1.18/(1+0.18)

Unlevered beta of steel sector = 1.18/1.18

Unlevered beta of steel sector = 1

Levered beta of steel business = 1*[1+((1-0.3)*1.5)]

Levered beta of steel business = 1*[1+(0.7*1.5)]

Levered beta of steel business = 1*(1+1.05)

Levered beta of steel business = 1*2.05

Levered beta of steel business = 2.05

Unlevered beta of financial services sector = Current beta of financial services sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)

Unlevered beta of financial services sector = 1.14/[1+((1-0.4)*0.7)]

Unlevered beta of financial services sector =1.14/[1+(0.6*0.7)]

Unlevered beta of financial services sector = 1.14/(1+0.42)

Unlevered beta of financial services sector = 1.14/1.42

Unlevered beta of financial services sector = 0.80

Levered beta of financial services business = 0.8*[1+((1-0.3)*1.5)] = 0.8*[1+(0.7*1.5)] = 0.8*(1+1.05) = 0.8*2.05 = 1.64

Levered beta for the company = (0.7*2.05) + (0.3*1.64)

Levered beta for the company = 1.44 + 0.49

Levered beta for the company = 1.93

Hence, the levered beta for the company is 1.93.

Final answer:

To estimate the levered beta for a company with operations in multiple sectors - steel and financial services in this case - you take a weighted average of the sector betas based on earnings distribution to get the unlevered beta. You then adjust for the company's debt/equity ratio and tax rate to get the levered beta. The estimated levered beta for this company is 2.378.

Explanation:

To estimate the levered beta for the company, we first need to consider the betas for each of the sectors the company operates in - steel and financial services. Given the firm's earnings distribution, the unlevered beta is computed as 0.7*Steel Beta + 0.3*Financial Services Beta = 0.7*1.18 + 0.3*1.14 = 1.16.

Next, to calculate the levered beta, we need to factor in the firm's debt/equity ratio. We use the formula for the levered beta: Levered Beta = Unlevered Beta * (1 + (1 - Tax Rate) * D/E ratio). Substituting the values we have: Levered Beta = 1.16 * (1 + (1 - 0.3) * 1.5) = 1.16 * 2.05 = 2.378. Therefore, the estimated levered beta is 2.378.

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Statz Company had sales of $1,900,000 and related cost of goods sold of $1,100,000 for its first year of operations ending December 31, 20Y1. Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company estimates that customers will request refunds for 1.7% of sales and estimates that merchandise costing $12,000 will be returned. Assume that on February 3, 20Y2, Buck Co. returned merchandise with an invoice amount of $5,300 for a cash refund. The returned merchandise originally cost Statz Company $3,200.Required:
a. Journalize the adjusting entries on December 31 to record the expected customer returns.
b. Journalize the entries to record the returned merchandise and cash refund to Buck Co. on February 3.

Answers

Answer:

pasensya na di ko alam ang sagot

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