Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. a company’s accounts must be ad
1 answer:
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Answer:
The company should accept the idea because profit will increase by $24,000.
Explanation:
A company is currently selling 10,000 units of product monthly for $40 per unit.
The unit contribution margin is $27.
The company believes that spending $50,000 per month on advertising will allow them to increase the selling price to $45 and that sales will increase by 750 units per month.
The unit contribution margin is the difference between selling price and variable cost per unit.
An increase in the selling price of $5 will cause the contribution margin to increase by $5, from $27 to $32.
Profits is the product of contribution margin and number of output.
At initial price, the profit was
=
= $270,000
At the new price the profit will be
= - $50,000
= $344,000 - $50,000
= $294,000
The increase in profit
= $294,000 - $270,000
= $24,000
Answer:
1. Attached is the Stockholder's equity section of the company's balance at the end of the current year.
Preferred stock = 2,500 (half of 5,000) were issued at par value of $100 each = 2,500 * 100 = $250,000
Additional Paid in capital for Preferred stock = (103 - 100) * 2,500 = $7,500
Common stock = 59,000 issued at stated value of $2 = 59,000 *2 = $118,000
Additional Paid in capital for Common stock = (22 - 2) * 59,000 = $1,180,000
2. The Stockholder's equity section is prepared with the book values of the relevant entries. As such, it WILL NOT be affected by changes in market value.
