Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 13%. According to the capital asset pricing model: a. What is the expected rate of return on the market portfolio? (Round your answer to 2 decimal places.) b. What would be the expected rate of return on a stock with β=0 ? (Round your answer to 2 decimal places.) c. Suppose you consider buying a share of stock at $46. The stock is expected to pay $2 dividends next year and you expect it to sell then for $48. The stock risk has been evaluated at β=−.5. Is the stock overpriced or underpriced? Underpriced Overpriced

Answers

Answer 1

a. The expected rate of return on the market portfolio is 13%.

B. The expected rate of return on a stock with β=0 is 6%.

C. The expected rate of return on the stock is only 1.5%, which is lower than the total return of 8.7%, the stock is currently underpriced. Therefore, buying the stock at $46 would be a good investment opportunity.

a. According to the capital asset pricing model, the expected rate of return on the market portfolio is calculated as:

Expected Rate of Return on Market Portfolio = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

where the beta of the market portfolio is 1.

So, substituting the given values, we get:

Expected Rate of Return on Market Portfolio = 6% + 1 * (13% - 6%) = 13%

Therefore, the expected rate of return on the market portfolio is 13%.

b. According to the capital asset pricing model, the expected rate of return on a stock with beta equal to 0 would be equal to the risk-free rate, which is 6% in this case.

Therefore, the expected rate of return on a stock with β=0 is 6%.

c. The expected rate of return on the stock can be calculated using the capital asset pricing model as:

Expected Rate of Return on Stock = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

Substituting the given values, we get:

Expected Rate of Return on Stock = 6% + (-0.5) * (13% - 6%) = 1.5%

Therefore, the expected rate of return on the stock is 1.5%.

The current price of the stock is $46, and it is expected to pay a dividend of $2 next year and sell for $48. The total return on the stock can be calculated as:

Total Return on Stock = Dividend Yield + Capital Gain Yield

Dividend Yield = Dividend / Price = $2 / $46 = 4.35%

Capital Gain Yield = (Sale Price - Purchase Price) / Purchase Price = ($48 - $46) / $46 = 4.35%

Total Return on Stock = 4.35% + 4.35% = 8.7%

Since the expected rate of return on the stock is only 1.5%, which is lower than the total return of 8.7%, the stock is currently underpriced. Therefore, buying the stock at $46 would be a good investment opportunity.

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Related Questions

In its fourth year, a project is expected to generate earnings before interest, taxes, depreciation, and amortization of $123,884 and its depreciation and amortization expense is expected to be $25,252. If the company’s tax rate is 35%, what is the project’s expected net operating profit after taxes for the year?

Answers

Answer:

$64,111

Explanation:

The computation of the project’s expected net operating profit after taxes for the year is shown below:-

Earning before interest and tax is

= earnings before interest, taxes, depreciation, and amortization - depreciation and amortization expense

= $123,884 - $25,252

= $98,623

Profit After tax = Earning before interest and tax × (1 - Tax rate)

= $98,623 × (1 - 35%)

= $64,111

Therefore we have applied the above formula to reach the profit after tax.

Which are the two best examples of long-term needs that people need to save for?
1) college education
2)down payment on a home
3)medical emergences
4)plumbing problems in the home
5) unexpected car repair

Which are the two best examples of long-term needs that people need to save for?1) college education2)down

Answers

Answer:

1. college education

2. medical emergencies

Explanation:

"Long-term needs" refer to things that you will be needing in the future. Among the choices above, the two best examples of long-term needs that people need to save for are: college education and medical emergencies.

Saving up for college is important if you want to have a bright future or a better salary. Having a good income will give you the chance to save up for your future home's down payment as well as mortgage payment. It will most likely give you a better quality of life. Thus, college education should come first.Saving up for medical emergencies is also crucial because we're all human beings who, at some point, will deteriorate physically. There are also incidents which we cannot control such as "car accidents." Having money allotted for it will prevent you from borrowing money from other people.

ZARA uses a First-In.First-Out (FIFO) perpetual inventory system and has the following purchases and seles
February
10
February 16
50 units were purchased at
535 per unit.
75 units wore purchased at
$66 per unit.
What is the cost per unit sold assuming that 29 units were sold on February 29?

Answers

ZARA uses the FIFO perpetual inventory system and had two purchase transactions in February. On February 10, 650 units were purchased at $535 per unit, and on February 16, 75 units were purchased at $66 per unit. The cost per unit sold, using the FIFO perpetual inventory system, is approximately $1,947.62.

Given that 29 units were sold on February 29, we need to determine the cost per unit sold.

To calculate the cost per unit sold, we need to follow the FIFO method, which assumes that the first units purchased are the first ones sold. In this case, we first consider the 650 units purchased on February 10, followed by the 75 units purchased on February 16.

1. Calculate the cost of units sold from February 10: Since 29 units were sold, we start by assigning the cost of the units purchased on February 10 to the units sold. Multiply the number of units sold (29) by the cost per unit from February 10 ($535).

29 units * $535 per unit = $15,515

2. Calculate the remaining cost of units sold from February 16:

As we exhaust the units purchased on February 10, we need to allocate the remaining units sold to the ones purchased on February 16. Subtract the number of units sold from the total units purchased on February 10 (650 - 29).

Remaining units = 650 - 29 = 621 units

Multiply the remaining units (621) by the cost per unit from February 16 ($66).

621 units * $66 per unit = $40,986

3. Calculate the total cost of units sold:

To find the total cost of units sold, add the cost calculated from February 10 ($15,515) to the cost calculated from February 16 ($40,986).

Total cost of units sold = $15,515 + $40,986 = $56,501

4. Calculate the cost per unit sold:

Divide the total cost of units sold by the total number of units sold (29).

Cost per unit sold = $56,501 / 29 units = $1,947.62 (rounded to the nearest cent) Therefore, the cost per unit sold, using the FIFO perpetual inventory system, is approximately $1,947.62.

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Can anyone help me?
Saving money allows u to set more aside in a(n) ____ fund

Emergency
Bond
Exchange

Can anyone help me? Saving money allows u to set more aside in a(n) ____ fund Emergency BondExchange

Answers

Answer:

Saving money allows you to set more aside in an Emergency fund.

why do competitive markets work better for life insurance than for income insurance?

Answers

Answer:Because insurance market is competitive, when companies become profitable, they start adopting a more lenient underwriting criteria and lower their premiums to grab more market share.

Explanation:

Other insurance companies react by adopting the same policies, to prevent their shares taken away or to increase their market share.

You are watching a presidential debate. When a candidate is questioned about his position on economic growth, the presidential candidate steps forward and says, "We need to get this country growing again. We need to use tax incentives to stimulate saving and investment, and we need to get that budget deficit down so that the government stops absorbing our nation's saving." A. If G remains unchanged, what inconsistency is implied by the presidential candidate's statement? B. If the presidential candidate truly wishes to decrease taxes and decrease the budget deficit, what has the candidate implied about his plans for G?

Answers

The inconsistency implied by the presidential candidate's statement is that if government spending (G) remains unchanged, then a decrease in tax revenue and an increase in saving and investment would lead to a larger budget deficit, not a decrease.

If the presidential candidate truly wishes to decrease taxes and decrease the budget deficit, the candidate has implied that their plans for government spending will need to be decreased as well. By decreasing government spending, the candidate can offset the reduction in tax revenue and prevent budget deficit from increasing.

It involves cutting certain programs, reducing subsidies or transfer payments, or measures to decrease the government's overall spending. Without a decrease in government spending, the candidate's plan to decrease taxes and decrease the budget deficit would not be feasible or effective.

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Culver City College, a public college, has a 10-week summer session that starts on June 25, 2020, so that one week is held during FY 2020 and the other nine weeks meet during FY 2021. Tuition and fees in the amount of $1,000,000 were collected from students for classes to be conducted in this session.

Required:
What amount should Culver City College recognize as unrestricted revenue in each of the years ended (FYE) June 30, 2020 and June 30, 2021?

Answers

Based on the information given, the amount that will be recognized as unrestricted revenue in each of the years will be $100,000 and $900,000.

Unrestricted revenue simply means the donations that can be used by a company or group for purposes that meet the goals that were set aside.

From the information, the unrestricted revenue in June 30, 2020 will be:

= 10% × $1,000,000

= $100,000

The unrestricted revenue for June 30, 2021 will be:

= $1,000,000 - $100,000

= $900,000

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true or false? effective evaluation measures of a sales force should include both input and output measures.

Answers

The given statement " effective evaluation measures of a sales force should include both input and output measures." is True. Evaluation measures of a sales force should aim to provide both input and output measures. Input measures provide information on how effective and efficient the sales force is in utilizing available resources to reach the desired outcomes.

On the other hand, output measures offer details about the actual sales and profits made.The input measures of sales force evaluation typically involve assessing the recruitment, training, and deployment of the sales team members, the working environment, and the available sales tools and resources.

The output measures entail examining the sales volume, revenues, and profits attained over a given period. The ratio of sales to the number of sales representatives and customer feedback, are also commonly used as output measures in sales force evaluation.The use of both input and output measures in sales force evaluation is crucial in identifying the areas of strengths and weaknesses of a sales team.

In addition, both types of measures can help organizations to establish effective strategies to optimize the performance of their sales force. Hence, it is true that effective evaluation measures of a sales force should include both input and output measures.

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What is the biggest financial worry of most individuals and what can they do about it

Answers

Biggest financial worry would differ from person to person, from time to time, and from age to age. A 13 year old might be more worried about where to spend his money while a 31 year old would be more worried about how much he can save.

General financial worries include: how to pay off debt, how to save money for college and school, how to invest money and where.

The solution would be to save money instead of having to take a loan from the bank, which will increase your debt. With proper planning one can avoid debt, if they plan for the future. Investment is something that should be studied and people would need to educate themselves about the market and investing. To save money for college and school, again proper financial planning is required and timely planning as well. One should plan years and months ahead of time when it comes to finance so that they don’t have to suffer from issues like debt and school or college fees.

What is the answer I chose the one I thought was the answer

What is the answer I chose the one I thought was the answer

Answers

Answer: I think that ones the answer too

Answer:

c is

Explanation:

Select the correct answer. What is a SWoT analysis?
A. marketing strategy
B. a market research strategy
C. a strategy to spot opportunities D. a strategy to allocate resources E. astrategy to understand resource allocation​

Answers

Answer:

B

Explanation:

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis (or SWOT matrix) is a strategic planning technique used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning.

Answer:

I think its C.

Explanation:

I'm trying to find the answer, too, but I know it's not B because I got it wrong before. D and E don't match SWOT at all, so those are out. It's either A or C. C seems the better bet though, as what I've learned from the internet, it helps in deciding a market research strategy, not being one itself.

So C is the right answer from using the process of elimination.

Why is creating an entrepreneurial team a good idea?

Answers

It's essential, therefore, that they can work together, communicate, and collaborate effectively. Building a team with fellow business professionals you respect and admire is importance

ASAPP PLZZZZ
3. In the mythical kingdom of Erehwon, the basic unit of money is the rudolf. At today's exchange rate, 4 rudolfs are equal to $1. A U.S. tourist in Erehwon wishes to purchase a guidebook to the country. The price is 6 rudolfs. How much is this in U.S. money?
(A) $1.50
(B) $6
(C) $4
(D) $24

Answers

A. Because if you divide the $1 by 4 it can only become 25 cents. So add 2 more rudolfs into the 4 and it becomes $1.50

short poem on professional

Answers

Answer:

professional When you walk into work you make a schedule It's not something to be ashamed of It's something to work hard on keep on moving in the game you'll make it so far You will live in a big house and maybe buy a car Whan I think everybody is special and if you think about it be we'll all be professional

Explanation:

Which is an example of a small business showing social responsibility to individuals within the company?
A. starting an office recycling program
B. developing sustainable business practice
C. donating money to local organizations
D. allowing employees to work from home

Answers

Starting an office recycling program, developing sustainable business practice and donating money to local organizations are examples of a small business showing social responsibility to individuals within the company.

Company have a social responsibility to the communities in which they operate. This includes ensuring that they are good corporate citizens, providing support for local causes and charities, and protecting the environment.

Sustainable business is a term that is often used to describe businesses that are environmentally friendly or that have a positive social impact.

Hence, the correct options are "A, B & C".

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Strategies for managing conflict

Answers

Can I get a brainest point plsssssss

1. Don't Ignore Conflict

If you're someone who dislikes dealing with conflict, it might seem tempting to just put your head in the sand and pretend it doesn't exist, hoping it will resolve itself on its own. While this sometimes can happen, the truth is that the vast majority of the time, this will only cause the situation to get worse. Ignored conflicts have a tendency to fester over time and reappear at inopportune moments, so do your team a favor and address conflicts when they occur, nipping a potentially toxic situation in the bud as soon as you recognize it.

2. Clarify What the Issue Is

If you're dealing with a conflict between two members of your team, it's important that you get all the facts. Sit down with each individual involved and find out exactly what the issue is. How is each individual perceiving the situation? What needs are not being met? What does each party see as an appropriate resolution? Make sure that all parties involved understand that you are acting as an impartial mediator, and let them know they can feel comfortable to share sensitive information.

3. Bring Involved Parties Together to Talk

Once you've had a chance to talk to all involved parties separately, bring them together in a meeting so that they can hash out their differences in a neutral environment. This is a time for brainstorming, active listening, and being open to different perspectives - the goal is to come to a common understanding of what the problem is, what role each individual is playing in the conflict, and what some possible solutions might be.

4. Identify a Solution

After both parties have had a chance to discuss the situation at hand, it's time to identify what a satisfactory resolution might be - and how to get there. Ideally, by this point, both parties will understand the other's side, and oftentimes the conflict will be resolved just through facilitated, open dialogue. However, if the situation requires further resolution, you will need to step in and help them negotiate a reasonable solution. This phase can require some time and effort, as it requires both parties to set aside their differences and preferences and find some common ground to work towards (which may involve not getting everything they want out of the situation). Then, work with both individuals to come up with a concrete list of steps that will result in the solution being achieved.

5. Continue to Monitor and Follow Up on the Conflict

Just because a solution has been identified and addressed doesn't mean it will just go away. As a manager, it's your responsibility to check in with both parties to ensure that the conflict has truly been dealt with, and that the steps identified to reach a solution are being followed. If all seems to be going well, simply remember to stop and observe from time to time, just to see if things really are going smoothly or if there are still lingering tensions under the surface that need to be handled. If it's clear that the solution didn't work, or wasn't the right resolution for the situation, make sure to be proactive in working with both parties to readjust expectations, identify alternative solutions, and continue their dialogue to create a positive and healthy work environment.

Investment+x+pays+an+average+annual+rate+of+return+of+8%,+but+there's+a+3%+chance+that+you'll+lose+all+your+money.+what+is+the+expected+average+annual+rate+of+return+on+investment+(ignore+taxes).

Answers

Thhe expected average annual rate of return on the investment is 4.76%.

To calculate the expected average annual rate of return on an investment, we need to consider both the potential return and the probability of that return. In this case, the investment has an average annual rate of return of 8% and a 3% chance of losing all your money.

To calculate the expected average annual rate of return, we can use the following formula:

Expected return = (Probability of return A * Return A) + (Probability of return B * Return B) + ...

In this case, we have two potential returns:

Return A: 8% (with a probability of 97%)

Return B: -100% (with a probability of 3%)

Using the formula, we can calculate the expected average annual rate of return as follows:

Expected return = (0.97 * 8%) + (0.03 * -100%)

= 7.76% - 3%

= 4.76%

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Creating an anonymous complaint or grievance process is something
employers can implement to prevent which of the following?
O A. Layoffs
B. Harassment
C. Taxed income
D. Arguments

Answers

Answer is B.) Harassment

hope I could help goodluck

Which of the following is a true statement?



A sole proprietorship is a business owned by one person.
A partnership is a business owned by two or more persons.
The people involved in a partnership are called partners.

Answers

Answer:

IT is the last one

Explanation:

Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may buy as many balloons as it wishes. This agreement is

Answers

Answer:

c

Explanation:

The agreement between Marco and Clowns R Us is an illusory contract. This is because Clowns R Us is not obligated to buy any balloons.

The contract states that Clowns may buy as many balloons as it wishes, but it does not say that Clowns must buy any balloons.

An illusory contract is not a valid contract because it lacks consideration. Consideration is something that each party gives up in order to make the contract binding.

In this case, Marco is giving up the right to sell balloons to other businesses. However, Clowns R Us is not giving up anything. It is free to buy balloons from other businesses or not buy any balloons at all.

As a result, the contract between Marco and Clowns R Us is not enforceable. If Clowns R Us does not buy any balloons, Marco cannot sue them for breach of contract.

Here are some other examples of illusory contracts:

A contract that states that one party may buy as many widgets as they wish at the price of $1 per widget.

A contract that states that one party may hire the other party for as many hours as they wish at the rate of $1 per hour.

A contract that states that one party may rent a car for as many days as they wish at the rate of $1 per day.

In all of these cases, the party that is not obligated to do anything is not giving up anything in order to make the contract binding. As a result, the contracts are not enforceable.

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this line on a pro-forma includes the actual amount of rent collected by the landlord...?

Answers

Effective gross income( EGI) is the Implicit Gross Reimbursement Income plus other income minus vacancy and credit costs of a rental property.

Effective gross income( EGI), is all the income generated by a property, including rent, tenant remitments, and income from sources similar as dealing machines and laundry machines. It can also be defined as a property's implicit gross income, after charges similar as vacuities and credit costs have been abated.

EGI is a crucial variable in determining the value of a rental property and the true positive cash inflow that property could induce.

EGI is essential to the real estate investor because, at the end of the day, they need to know that the property they're considering copping generates enough positive cash inflow to cover yearly operating charges as well as any liens or encumbrances they may have taken on to buy the property.

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A bond has 10 years remaining until maturity, a YTM of 5% and a duration of 6.5. The cash (one-year) rate is 3%. i) You are expecting market yield to go up by 10 basis points in the next hour. What is the bond's expected percentage price change, and your expected return, over the next hour? Provide your full calculations for answering this question. ii) You are expecting that over the next year the market yield will go down by 40 basis points. For this period, estimate the following: The bond's expected price change Your expected return The bond's risk premium Provide all your workings and full calculations, when answering this question.

Answers

To calculate the bond's expected percentage price change and expected return over the next hour, we need to use the bond's duration and the change in market yield.

i) Expected percentage price change over the next hour:

The formula to calculate the percentage price change is:

Percentage price change = -Duration * Change in yield

Given:

Duration = 6.5

Change in yield = 10 basis points = 0.10%

Percentage price change = -6.5 * 0.10% = -0.65%

Therefore, the bond's expected percentage price change over the next hour is -0.65%.

ii) Expected price change, expected return, and risk premium over the next year:

To calculate the bond's expected price change and expected return over the next year, we can use the following formulas:

Expected price change = -Duration * Change in yield

Expected return = Expected price change + Coupon payment / Bond price

Bond's risk premium = Expected return - Cash rate

Given:

Duration = 6.5

Change in yield = -40 basis points = -0.40%

Coupon payment = YTM * Bond price

Cash rate = 3%

Expected price change = -6.5 * (-0.40%) = 2.6%

Coupon payment = 5% * Bond price

Expected return = 2.6% + (5% * Bond price) / Bond price = 2.6% + 5% = 7.6%

Bond's risk premium = 7.6% - 3% = 4.6%

Therefore, the bond's expected price change over the next year is 2.6%, the expected return is 7.6%, and the bond's risk premium is 4.6%.

In summary, over the next hour, the bond's expected percentage price change is -0.65%, indicating a decrease in price. However, without information about the coupon payments or the bond price, we cannot determine the expected return. Over the next year, the bond's expected price change is 2.6%, the expected return is 7.6%, and the bond's risk premium is 4.6%. These calculations assume that the change in yield affects the bond's price proportionally and that other factors remain constant.

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________ managers believe that their native country, culture, language, and behavior are superior to all others.

Answers

The name which is given to the manager who believe that their native country, culture, language, and behavior are superior to all others is known as being:

Ethnocentric

Who is an Ethnocentric person?

This refers to the the mindset of a person who believes that his personal beliefs, culture food and tradition is superior to others.

With this in mind, as we see that the manager believes that his native country, culture, language, and behavior are superior to all others, then we know that he is ethnocentric and not a very people oriented manager.

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You bought a stock one year ago for per share and sold it today for per share. It paid a per share dividend today. What was your realized​ return?.

Answers

12% was your realized return after bougth a stock for one year ago for $50 per share and sold it today for $55 per share .

In the given question we have , you bought rate a stock 1 year ago for $50 per share

sold rate of stock at today is $55 per share

It paid $1 per share dividend today .

To Compute the realized return and dividend yield on this equity investment we use the below formula

R = (dividend rate per share + sold rate of stock - bought rate of stock )/ bought rate of stock

here R is relaized return

Now, put all the values of given problem in above formula we get,

R = (1+ (55-50))/50 = 0.12 = 12%

So, the relaized return is 12% .

#Complete question:

You bought a stock 1 year ago for $50 per share and sold it today for $55 per share. It paid a $1 per share dividend today.What was your realized return?

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MetLife was able to dramatically expand its global footprint by acquiring Alico, a global player in the insurance business, from AIG in 2010 when AIG was in financial distress. This shows that not all diversification moves erode performance.

a) true

b) false

Answers

Answer:

True

Explanation:

It is true that not all diversification erodes performance. That is it is not all diversification moves that reduces performance or destroys it. Sometimes diversification could lead to greater risks or greater costs of investment. By diversifying and acquiring Alico metlife was able to increase and expand globally

a nurse manager notes several recent conflicts among nurses on different shifts

Answers

Conflicts among nurses on different shifts can be resolved through effective communication and conflict resolution strategies.

How can conflicts among nurses on different shifts be resolved?

Effective communication and conflict resolution strategies are key in addressing and resolving conflicts among nurses on different shifts. When a nurse manager notes several recent conflicts, it is essential to prioritize open lines of communication and encourage constructive dialogue among the nursing staff.

This can be achieved by promoting regular team meetings and fostering an environment that values and encourages respectful communication. Additionally, conflict resolution strategies such as mediation or facilitated discussions can be employed to help nurses express their concerns, understand differing perspectives, and work towards mutually beneficial solutions.

By actively addressing conflicts and providing the necessary support and resources, nurse managers can create a harmonious work environment that promotes collaboration and enhances patient care.

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During the first half of the nineteenth century, a number of advancements in transportation helped accelerate the movement of goods throughout the country and connect america to foreign markets. identify the effects each of these modes of transportation had on the economy.

Answers

The advancements in transportation during the first half of the nineteenth century, including canals, railroads, and steamships, had significant effects on the economy. These modes of transportation facilitated the movement of goods, improved trade connections, boosted industrial growth, expanded markets, and stimulated economic development.

Canals: The construction of canals, such as the Erie Canal, had a transformative impact on the economy. Canals allowed for efficient transportation of goods, reducing costs and enabling businesses to reach new markets. They facilitated trade connections between different regions, promoted the growth of industries, and encouraged agricultural production by providing access to broader markets.

Railroads: The introduction of railroads revolutionized transportation in the nineteenth century. Railroads provided faster, more reliable, and cost-effective transportation of goods. They connected regions and cities, opened up new markets, stimulated industrialization, and promoted urbanization. Railroads spurred economic growth by facilitating the movement of raw materials, manufactured goods, and people, leading to increased trade and market integration.

Steamships: Steamships transformed international trade by significantly reducing travel time and costs. They improved connections with foreign markets, expanded global trade networks, and facilitated the exchange of goods and ideas. Steamships enabled the transportation of larger quantities of goods, including perishable items, across longer distances, boosting international commerce and contributing to economic expansion.

Overall, these advancements in transportation during the first half of the nineteenth century played a crucial role in promoting economic growth, expanding markets, and connecting America to foreign markets, ultimately shaping the development of the national economy.

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Q 9.17: Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2nd, 2017. On July 31st, 2017, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31st, 2017, should be

Answers

Answer:

$35,000

Explanation:

The computation of the total amount debited to patent is shown below:

The Patent refers to the intellectual property in which the person has the right to stop the other people by using or making their creation

Here the $150,000 is spent on the research and development while the $35,000 is spent on legal fees

So the total amount debited should be $35,000 only so that the patent could be obtained

The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:



Amount
Sales $ 1,260,000
Selling price per pair of skis $ 450
Variable selling expense per pair of skis $ 50
Variable administrative expense per pair of skis $ 19
Total fixed selling expense $ 155,000
Total fixed administrative expense $ 105,000
Beginning merchandise inventory $ 70,000
Ending merchandise inventory $ 105,000
Merchandise purchases $ 285,000


Required:

1. Prepare a traditional income statement for the quarter ended March 31.

2. Prepare a contribution format income statement for the quarter ended March 31.

3. What was the contribution margin per unit?

Answers

Answer:

Refer to the below explanation

Explanation:

1. Traditional income statement.

Revenue $1,260,000

Cost of goods sold = Beginning inventory + purchases - Ending inventory

= $70,000 + $285,000 - $105,000

=$ 250,000

Gross profit= Sales - cost of goods sold

= $1,260,000 - $250,000

=$1,010,000

Administrative expenses = $19 × ($1,260,000/450) + $105,000

= $158,200

Selling expenses = $50 × ($1,260,000/450) + $155,000

=$295,000

EBITDA = $556,800

2. Contribution margin statement

Sales. = $1,260,000

Less

Total Variable cost:

Cost of goods sold =$250,000

Variable selling exp.

2800 × $50=$140,000

Administrative exp.

2800 × $19=$53,200

Total variable cost. =$56,800

Contribution margin =$1,203,200

Less

Total Fixed costs:

Selling expenses =$155,000

Administrative expenses=$105,000

Total fixed cost =$260,000

Net profit. = $943,200

3. Contribution margin per ratio

= Contribution margin / Quantity

=$1,203,200 / 2,800

=$430

Superior corp. applies manufacturing overhead to production at 65% of direct labor cost. during the year ended 20xx, manufacturing overhead of $129,220 was applied to production; actual manufacturing overhead was $156,500. ending work in process inventory was $22,440 and ending finished goods inventory was $31,020. work in process inventory increased by 20% during the year and finished goods inventory increased by 10% during the year. unadjusted cost of goods sold was $574,300. complete the following schedule:

Answers

Direct Labor Cost = $198,800

Beginning finished goods inventory = $28,200

Overhead = $27,280

COGM = $577,120

Current Manufacturing Cost = $249,100

Adjusted Cost of goods sold = $601,580

Working Notes:

(i) Direct labor cost = Overhead applied / direct labor cost applied to overhead as a percentage

Direct Labor Cost = 129220 / 0.65

Direct Labor Cost = $198,800

(ii) Beginning work in process = Ending WIP / (1 + percent increase)

Beginning WIP = 22440 / (1 + 0.20) = 22440 / 1.20

Beginning WIP = $18,700

Beginning finished goods inventory = 31020 / (1 + 0.10) = 31020 / 1.10

Beginning finished goods inventory = $28,200

(iii) Underapplied / Overapplied overhead = Actual OH - applied OH

Overhead = 156500 - 129220

Overhead = $27,280

(iv) Cost of Goods manufactured = Cost of products sold without adjustment + Ending finished goods inventory - Beginning Finished goods inventory

COGM = 574300 + 31020 - 28200

COGM = $577,120

(v) Current manufacturing cost =  cost of goods manufactured + Ending WIP - Beginning WIP

Current Manufacturing Cost = 577120 + 22440 - 18700

Current Manufacturing Cost = $580,860

(vi) Direct material used = Current manufacturing cost - direct labor -overhead applied

Direct Material = 599560 - 198800 - 129220

Direct Material = $252,840

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Superior corp. applies manufacturing overhead to production at 65% of direct labor cost. during the year
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