Answer:
True.
Explanation:
The cable company will not have any incentive to cut costs. This is because it knows that its costs will be averaged to determine the average cost to which a certain percentage is then added to arrive at the selling price. Having the cost averaged in this way will not motivate the cable company to seek cost minimization strategies that it could use to increase its income.
The statement is false. Under the average-cost pricing policy, the cable company has the incentive to cut costs to potentially lower prices and increase market share.
False, under the average-cost pricing policy, the cable company does have incentives to cut costs. The average-cost pricing policy allows the firm to set the price equal to the average cost of production. If the cable company can lower its cost of production, it will be able to lower the price it charges, which could potentially increase its market share and profits. Consider an example where economies of scale come into play: if each firm produced at a higher average cost due to building their own power lines, they would raise prices to cover this cost. However, if a firm found a way to reduce the cost of power lines or production in general, they could lower their prices in comparison to other firms. This demonstrates the incentive for cost-cutting under average-cost pricing.
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Employee Health Insurance Payable 450
Employee Income Tax Payable 400
Estimated Warranty Payable 600
Long-Term Notes Payable(Due 2019) 33,000
FICA—OASDI Taxes Payable 560
Sales Tax Payable 370
Mortgage Payable(Due 2020) 6,000
Bonds Payable(Due 2021) 53,000
Current Portion of Long-Term Notes Payable 3,500
What is the total amount of current liabilities?
Answer:
$18,880
Explanation:
Current Liabilities are those liabilities which need to be paid within on year time. These liabilities are also called short term liabilities.
Following Liabilities are considered as the current liabilities because these needs to be paid within one year.
Accounts Payable $13,000
Employee Health Insurance Payable $450
Employee Income Tax Payable $400
Estimated Warranty Payable $600
FICA—OASDI Taxes Payable $560
Sales Tax Payable $370
Current Portion of Long-Term Notes Payable $3,500
Total Current Liabilities $18,880
Following are all the Non current liabilities balances:
Long-Term Notes Payable(Due 2019) 33,000
Mortgage Payable(Due 2020) 6,000
Bonds Payable(Due 2021) 53,000
Answer:
The correct answer is letter "C": natural gas refinery.
Explanation:
Process cost systems are used by companies which production process go through several steps manufacturing large batches of homogeneous products. Process costing uses a Work-In-Progress (WIP) account for the progress of the production. Typical examples of industries that use the process costings system are petroleum and paint.
A process cost system would be appropriate for a jet airplane builder and natural gas refinery.
A process cost system would be most appropriate for a jet airplane builder and natural gas refinery. Both of these industries involve the production of a large number of identical units and require the accumulation of costs by department or process.
In a jet airplane builder, each department would be responsible for a specific process such as assembling the fuselage, attaching the wings, or installing the engine. The costs incurred in each department, such as labor, materials, and overhead, would be accumulated separately to determine the total cost of producing each airplane.
In a natural gas refinery, the production process involves multiple stages such as separating impurities, distillation, and purification. Each stage would have its own associated costs, and a process cost system would allow for the tracking and allocation of costs to each stage.
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15.1% and 17.7%
17.5% and 18.8%
15.1% and 18.8%
None of the above options is correct.
Income from continuing operations is $61,011 $41,226
Current Year Previous Year
Revenues:
Admissions 20.28≅ 20.3 20.81 ≅20.8
Event-related revenue 29.61 ≅ 29.6 30.32≅30.3
NASCAR broadcasting revenue 43.80≅ 43.8 42.82≅42.8
Other operating revenue 6.31 ≅ 6.3 6.05≅6.1
Total revenues 100% 100%
Expenses and other:
Direct expense of events 21.01 ≅ 21.0 21.10≅ 21.1
NASCAR event management fees 29.61≅ 29.6 26.48≅ 26.5
Other direct expenses 3.94 ≅ 3.9 3.82≅3.8
General and administrative 35.84 ≅ 35.8 40.08≅40.1
Total expenses and other 87.72 ≅ 87.7 91.49≅ 91.5
Income from continuing operations 12.23% 8.51%
Vertical Analysis =(Income Statement Item/ Sales )*100
We prepared a comparative income statement for these two years in vertical form, stating each item as a percent of revenues.
Current Year Previous Year
Revenues:
Admissions $100,694 $100,798
Event-related revenue 146,980 146,849
NASCAR broadcasting revenue 217,469 207,369
Other operating revenue 31,320 29,293
Total revenues $496,463 $484,309
Expenses and other:
Direct expense of events $104,303 $102,196
NASCAR event management fees 133,682 128,254
Other direct expenses 19,541 18,513
General and administrative 177,926 194,120
Total expenses and other $435,452 $443,083
Income from continuing operations $61,011 $41,226
The complete question is Vertical Analysis of Income Statement The following comparative income statement (in thousands of dollars) for two recent fiscal years was adapted from the annual report of Speedway Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways. Current Year Previous Year Revenues: Admissions $100,694 $100,798 Event-related revenue 146,980 146,849 NASCAR broadcasting revenue 217,469 207,369 Other operating revenue 31,320 29,293 Total revenues $496,463 $484,309 Expenses and other: Direct expense of events $104,303 $102,196 NASCAR event management fees 133,682 128,254 Other direct expenses 19,541 18,513 General and administrative 177,926 194,120 Total expenses and other $435,452 $443,083 Income from continuing operations $61,011 $41,226 a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. (Note: Due to rounding, amounts may not total 100%). Round your percentages to one decimal place.
To learn more about income statement refer to:
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The comparative income statement for Speedway motorsports Inc. over several fiscal years gives insights into revenue, costs, and profit trends. Increasing revenues coupled with increasing costs might indicate a need for cost efficiency, while a higher rate of profit growth compared to revenues could suggest effective cost management.
The question refers to a comparative income statement of Speedway Motorsports, Inc., a major operator of motor speedways. A comparative income statement compares the income statements of a company across several fiscal years. This can provide valuable insights into how revenues, costs, and profits are developing over time, and thus give indications of how the company's business model is working and where there might be room for improvements.
For example, if Speedway Motorsports' income statements show increasing revenues but also increasing costs, it might indicate that they need to work on cost efficiency. Alternatively, if profits are increasing faster than revenues, it could suggest that their cost management is effective.
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Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
b. Ms. Eaton comes up with a new plan to cut fixed costs to $210,000. However, more labor will now be required, which will increase variable costs per unit to $40. The sales price will remain at $68. What is the new break-even point?
c. . Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
a. Profitability will be less
b. Profitability will be more
Answer:
a. $584,800
b. $510,000
c. Profitability will be more
Explanation:
a.
Contribution Margin = Selling price - variable cost = $68 - $37 = $31
The break-even point is the level of sales at which the business incur no profit no loss.Fixed and variable costs are covered at this level of sales. Use following formula of break-even to calculate the fixed cost.
Break-even point = Fixed cost / Contribution margin ratio
Break-even point = $266,600 / ($31 / $68) = $584,800
b.
Contribution Margin = Selling price - variable cost = $68 - $40 = $28
Break-even point = Fixed cost / Contribution margin ratio
Break-even point = $210,000 / ($28 / $68) = $510,000
c.
As the break-even point is decreases it means the cost of associated with the product is decreased because the selling price remains constant. Although there is an increase in the variable cost but reduction in fixed cost has more effect than increase in variable cost.