Closing and opening stores. Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows:
Connecticut Store Rhode Island Store
Revenues $1,150,000 $820,000
Operating costs
Cost of goods sold 700,000 640,000
Lease rent (renewable each year) 86,000 71,000
Labor costs (paid on an hourly basis) 41,000 44,000
Depreciation of equipment 21,000 19,000
Utilities (electricity, heating) 40,000 49,000
Allocated corporate overhead 50,000 42,000
Total operating costs 938,000 865,000
Operating income (loss) $212,000 $(45,000)
The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Sanchez Corporation, makes the following comment, "Sanchez can increase its profitability by closing down the Rhode Island store or by adding another store like it."
1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead costs by $44,000. Calculate Sanchez’s operating income if it closes the Rhode Island store. Is Maria Lopez’s statement about the effect of closing the Rhode Island store correct? Explain.
2. Calculate Sanchez’s operating income if it keeps the Rhode Island store open and opens another store with revenues and costs identical to the Rhode Island store (including a cost of $22,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $4,000. Is Maria Lopez’s statement about the effect of adding another store like the Rhode Island store correct? Explain.

Answer:

Sanchez Corporation

1.                                                       Connecticut

                                                         Store          

Revenues                                        $1,150,000  

Operating costs

Cost of goods sold                             700,000

Lease rent (renewable each year)      86,000

Labor costs (paid on an hourly basis)  41,000

Depreciation of equipment                  21,000

Utilities (electricity, heating)                40,000

Allocated corporate overhead           92,000

Total operating costs                       980,000

Operating income (loss)                 $170,000

Maria Lopez is correct by $3,000 increase in operating income.

2.                                                   Connecticut  Rhode Island   Identical

                                                            Store            Store            Store

Revenues                                        $1,150,000   $820,000   $820,000

Operating costs

Cost of goods sold                             700,000     640,000     640,000

Lease rent (renewable each year)      86,000         71,000        71,000

Labor costs (paid on an hourly basis)  41,000        44,000       44,000

Depreciation of equipment                  21,000         19,000      22,000

Utilities (electricity, heating)                40,000        49,000      49,000

Allocated corporate overhead           50,000        42,000         4,000

Total operating costs                       938,000      865,000    808,220

Operating income (loss)                $212,000     $(45,000)     $11,780

Maria Lopez is correct by $11,780 increase in operating income.

Explanation:

a) Data and Calculations:

                                                  Connecticut  Rhode Island

                                                         Store            Store

Revenues                                        $1,150,000   $820,000

Operating costs

Cost of goods sold                             700,000     640,000

Lease rent (renewable each year)      86,000         71,000

Labor costs (paid on an hourly basis)  41,000        44,000

Depreciation of equipment                  21,000         19,000

Utilities (electricity, heating)                40,000        49,000

Allocated corporate overhead           50,000        42,000

Total operating costs                       938,000      865,000

Operating income (loss)                $212,000     $(45,000)

As a result of recent downsizing at his firm, Dominic lost his job as an IT manager for a large telecommunications company. A true, self-confirmed computer nerd, Dominic knew that several of his past contacts often outsourced their computer problems. He decided it was a good time to test the waters and see if he could secure enough computer clients to be in business for himself. His success demonstrated that

Your firm needs a computerized machine tool lathe which costs $51,000 and requires $12,100 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 34 percent and a discount rate of 11 percent. If the lathe can be sold for $5,100 at the end of year 3, what is the after-tax salvage value

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TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 9 pounds $ 1.80 per pound $ 16.20 Direct Labor 0.25 hour $ 7.20 per hour 1.80 $ 18.00 During November, TaskMaster purchased 198,000 pounds of direct materials at a total cost of $376,200. The total factory wages for November were $46,000, 90% of which were for direct labor. TaskMaster manufactured 21,000 units of product during November using 170,000 pounds of direct materials and 6,000 direct labor hours. What is the direct labor efficiency variance for November

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Mighty Safe Fire Alarm is currently buying 58,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $29 per unit; direct labor, $10 per unit; and variable factory overhead, $15 per unit. Fixed costs for the plant would increase by $81,000. Which option should be selected and why

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When Argentina fixed the exchange rate of their peso to the U.S. dollar, one outcome was: Group of answer choices Argentinean central bankers effectively gave control of their domestic interest rate to the FOMC. Argentinean central bankers regained control of their domestic interest rate. Argentinean central bankers were finally able to focus their attention on domestic monetary policy. Argentineans began using the U.S. dollar for all of their transactions.

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Consider the following scenarios.
a. Scenario one has two options available.
Option A: There is a 50% chance of winning $1,000 and a 50% chance of winning $0.
Option B: There is a 100% chance of receiving $500.
A risk-averse person (Click to select) will choose option A will choose option B will be indifferent between options A and B might choose option A or might choose option B .
b. Scenario two has two different options available.
Option C: There is a 40% chance of winning $90 and a 60% chance of winning $110.
Option D: There is a 100% chance of winning $90.
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Option E: There is a 50% chance of winning $0 and a 50% chance of winning $100.
Option F: There is a 50% chance of winning $20 and a 50% chance of winning $60.
A risk-averse person (Click to select) will choose option E will choose option F will be indifferent between options E and F might choose option E or might choose option F .

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(1) What is the size of Labor force?
(2) What is the Unemployment rate?

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Hetrick Dentistry Services operates in a large metropolitan area. Currently, Hetrick has its own dental laboratory to produce porcelain and gold crowns. The unit costs to produce the crowns are as follows:

Porcelain Gold
Raw materials $70 $130
Direct labor 27 27
Variable overhead 8 8
Fixed overhead 22 22
Total $127 $187

Fixed overhead is detailed as follows:

Salary (supervisor) $26,000
Depreciation 5,000
Rent (lab facility) 32,000

Overhead is applied on the basis of direct labor hours. These rates were computed by using 5,500 direct labor hours. A local dental laboratory has offered to supply Hetrick all the crowns it needs. Its price is $125 for porcelain crowns and$150 for gold crowns; however, the offer is conditional on supplying both types of crowns—it will not supply just one
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old and has no market value), and the lab facility would be closed. Hetrick uses 2,000 porcelain crowns and 600 gold crowns per year.

Required:
Conceptual Connection: Should Hetrick continue to make its own crowns, or should they be purchased from the external supplier?

Kierofree Air Tours has the following payroll data for its November 5 pay date:
Nov 5 Wages and salaries expense 522 $199,023.00
Federal withholding tax payable 220 $33,833.91
Social Security tax payable 221 11,442.35
Medicare tax payable 222 2,676.03
401(k) contributions payable 223 6,965.81
Health Insurance payable 224 14,468.97
Union Dues payable 227 4,975.58
Wages and salaries payable 226 ???
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a) $199,023.00
b) $185,216.26
c) $142,578.94
d) $124,660.35

Use the following table:

Present Value of an Annuity of 1
Period 8% 9% 10%
1 0.926 0.917 0.909
2 1.783 1.759 1.736
3 2.577 2.531 2.487

A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $450000 and is expected to generate cash inflows of $200000 at the end of each year for three years. The net present value of this project is:________

a. $100000.
b. $506200.
c. $56200.

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(b) Total material cost of December 31, 2020, inventory:_______
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b. The instrument is correlated with
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C) 350 of every 100,000 adults in this country
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O identity theft damage repair
O food safety
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