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The P Company applies overhead costs to jobs using machine hours as the allocation base. At the beginning of the year, 2014, the company estimated manufacturing overhead costs to be $1,400,000 and estimated total machine hours (the expected volume) to be 56,000 hours. During the year many jobs were completed. One job, Job #125 was completed and had the following data: total direct material costs were $2,500, total direct labor costs were $3,250, and actual machine hours worked on the job totaled 75 hours. At the end of 2014, the corporate controller determined that total actual overhead costs incurred for all jobs totaled $1,450,000 and the actual machine hours incurred during 2014 for all jobs totaled 58,400 hours. Given this data, answer the following questions with supporting computations. Required: a. Compute the predetermined overhead rate for 2014. Be sure to include a proper label. b. If 25 units were made in Job #1275, determine the total cost of the job and the cost per unit. c. Determine the total amount of overhead that was Under- or Over-Applied for the year 2014. Be sure to specifically state whether the amount you determined is UNDER or OVER-APPLIED overhead. d. If the entire overhead variance is closed to cost of goods sold, what is the effect on gross profit and net operating income? e. If the company had used CAPACITY (normal) volumes, which are greater than the expected volumes used above, to determine the predetermined overhead rate, what would be the likely impact on the following items: 1) the predetermined overhead rate, 2) the amount of overhead applied to jobs, and 3) the resulting over/under applied computations?
A call with a strike price of $70 costs $7.71. A put with the same strike price and expiration date costs $4.39. If you create a straddle, what is the initial cash flow? If it's a cash outflow, answer in a negative number.
Pistol Pete's Platinum Palace has outstanding 5 year corporate bonds with a current yield of 6.50%. 5-Year T-Bonds have a current yield of 4.40%. The default risk premium for Pete's bonds is DRP = 0.40%. The liquidity premium on Pete's bonds is 1.70%..
What are the methods for estimating debit cost of capital, and what do you do when there is default risk? Explain the circumstances in which you would use each method.
Suppose “s” (the fraction of your wealth put into stocks) is 0.8 and that stocks have a return of 25 percent. If the return on bonds is 3 percent, what is the return on your wealth?
Common stockholders expect greater returns than bondholders because: An decrease in the ________ will increase the value of preferred stock. Changes in the general economy, such as changes in interest rates or tax laws, represent what type of risk?
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,500 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $42,300. What is the external financing needed?
Smith Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 15%. If Smith has 40 million shares ..
Tom Barnes contributed equipment, inventory, and $43,222 cash to the partnership. The equipment had a book value of $28,168 and market value of $34,262. The inventory has a book value of $41,721, but only had a market value of $13,719. due to obsoles..
Global Inc. has a preferred share issue outstanding with a current price of $26.80. The firm is expected to pay a dividend of $1.90 per share a year from today. What is the firm's cost of preferred equity?
A firm purchased equipment three years ago for $23,097. Accumulated depreciation is $13,213, and the firm's tax rate is 30%. If the equipment is sold today for $20,519, how much net cash flow would be generated? Round your answer to the nearest whole..
The rate of return on Cherry Jalopies, Inc., stock over the last five years was 11 percent, 11 percent, -4 percent, 3 percent, and 7 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 16 percent, -5 percen..
Birds of a Feather have 10-year bonds outstanding that carry an annual coupon of 8 percent. The bonds mature in 7 years and are currently priced at 110 percent of face value. What is the firm's pretax cost of debt?
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