You sold two Dec gold futures contracts, of size 100 ounces per contract, at a price of $400 per ounce. The margin requirement is 10% of the initial position’s value. There is no maintenance margin, but once the margin account balance falls below 8%, it has to be topped back up to at least 10% of the initial value of position.
Demonstrate marking-to-market on this position for the next 4 days, assuming settlement prices are $420, $430, $380 & $410. Show all daily settlements, including margin calls on the investor’s margin account. If you close out your position at the end of Day 4, describe the balance in your margin account.
In: Finance
Data for Hermann Corporation are shown below:
|
|
Per Unit |
Percentage of Sales |
|
Sales price |
$90 |
100 |
|
Less: Variable expenses |
63 |
70 |
|
Contribution margin |
$27 |
30 |
Fixed expenses are $40,000 per month, and the company is selling 2,000 units per month.
Required:
In: Accounting
Molly shorts 100 shares of a non-dividend-paying stock at the initial stock price of $60 per share. She invests the proceeds at the continuously compounded risk-free interest rate of 0.05 in a savings account. She does not make any subsequent withdrawals from or deposits to this account until the short sale is closed. When Molly closes the sort sale, six months later, the stock price is $55. Does she have enough money in the savings account to be able to close the short sale without using additional funds?
In: Finance
Per unit data concerning a product manufactured by XYZ Co. are given below:
|
Selling price |
$100 |
|
Direct materials, direct labor, and variable manufacturing overhead |
40 |
|
Fixed manufacturing overhead |
25 |
|
Variable selling expense |
10 |
|
Fixed selling and administrative expense |
7 |
The above per unit data are based on annual production of 10,000 units. The company has received a special, one-time-only order for 500 units of the product with a selling price of $60. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and total fixed selling and administrative expenses of the company would not be affected by the order. If XYZ accepts the order, it will have no effect on other customers. Assuming that XYZ has excess capacity and can fill the order without cutting back on the production of any product, what is the financial advantage (disadvantage) of company accepting the special order?
| A. |
$11,000 financial disadvantage |
|
| B. |
$20,000 financial disadvantage |
|
| C. |
$10,000 financial advantage |
|
| D. |
$5,000 financial advantage |
XYZ manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows:
|
Sales |
$50,000 |
|
|
Less expenses: |
||
|
Variable costs |
$40,000 |
|
|
Fixed costs |
36,000 |
76,000 |
|
Net operating loss |
$(26,000) |
XYZ is trying to decide whether or not to discontinue Product G.
Two thirds of fixed costs are avoidable if the product is dropped.
Assume that dropping Product G will have no effect on other
products. What is the financial advantage (disadvantage) of
dropping Product G?
| A. |
$14,000 financial advantage |
|
| B. |
$26,000 financial advantage |
|
| C. |
$2,000 financial advantage |
|
| D. |
$40,000 financial advantage |
Which of the following equation is NOT valid regarding spending variances shown in the flexible budget performance report?
| A. |
Total spending variance for fixed overhead = fixed overhead budget variance + fixed overhead volume variance. |
|
| B. |
Total spending variance for direct labor = labor rate variance + labor efficiency variance. |
|
| C. |
Total spending variance for variable overhead = variable overhead rate variance + variable overhead efficiency variance. |
|
| D. |
Total spending variance for direct materials = material price variance + material quantity variance, if actual quantity purchased = actual quantity used. |
Suppose a company applies variable manufacturing overhead to products on the basis of direct labor-hours. If the company’s labor efficiency variance is favorable, which of the following statement is TRUE?
| A. |
The company’s fixed overhead volume variance must be favorable as well. |
|
| B. |
The company’s variable overhead rate variance must be favorable as well. |
|
| C. |
The company’s labor rate variance must be favorable as well. |
|
| D. |
The company’s variable overhead efficiency variance must be favorable as well. |
In: Accounting
3) Assume Disney stock is trading at $100/share today but you believe its price will fall in the very near future to $80/share. If this is all you believe and assuming you want to make money, describe in great detail how you could profit from this belief. Make sure to use the correct terminology.
4) Assume you buy a $1,000 Par, 5% coupon, 10-year bond has when its trading at a Yield To Maturity (YTM) of 4%. If you sell it two years later (when it has a maturity of 8 years) when it’s YTM is 3.5% what is your Profit or loss in dollars, _____________________
In: Finance
Suppose the price of Apple’s common shares is $180/share. The
call option contract
(involves 100 shares) on Apple, with a strike price of $195/share
is $10/contract. With the
$180 you have, you are looking at two choices:
A: Buy one share of Apple’s common stock
B: Buy 18 call option contracts
(1) What are the rates of return on A and B if the share price has
dropped to $170/share?
(2) What are the rates of return on A and B if the share price has
increased to $200/share?
In: Finance
Using the three-step method, compute the dirty price (to 3 decimal places) of a $100 face-value bond maturing on 15-Feb-29, paying a 5%pa semi-annual coupons with a yield to maturity of 3%pa for settlement on 05-May-20. Set out the intermediate calculations for each of the three steps.
(Note there are 102 days between 05-May-20 and 15-Aug-2020. There are 182 days between 15-Feb-2020 and 15-Aug-2020)
In: Finance
Ng Corporation produces and sells only one product; its selling price is $100 and its variable cost is $60 per unit. The company’s monthly fixed expense is $35,000.
Required:
1. Using the equation method, determine the unit sales that are required to earn a target profit before tax of $4,000.
2. Using the formula method, determine for the dollar sales that are required to earn a target profit before tax of $5,000.
3. Using the formula method, calculate the number of units that need to be sold to earn an after-tax income of $6,000, assuming a tax rate of 25%.
In: Accounting
Risk assessment calculations
Baseline information: 40,000 units sold at a unit selling price of $100,
variable costs of $80 per unit, fixed costs of $750,000
1. Calculate the contribution margin per unit in dollars and as a percentage
2. Prepare a financial report in the contribution margin format
Calculate the breakeven point in dollars and unit sales
4. Prove the validity of the breakeven calculation by preparing a financial
report using the contribution margin format
5. Calculate the performance level in unit sales to earn net income of
$100,000
6. Prove the validity of the desired net income calculation by preparing a
financial report using the contribution margin format
7. Calculate the degrees of operating leverage
ithout preparing a financial report, calculate the increase in net income
f the number of units sold increased by 10%
9. Prove the validity of the operating leverage calculation by preparing a
financial report using the contribution margin format and assuming a 10%
increase in units sold
What-if calculation
Calculate net income resulting from these changes to the baseline
information: units sold and selling price remained the same, variable costs
were increased by $10, and fixed costs were decreased by $250,000
SOLUTION
1. Contribution margin per unit = Sales price - Variable costs
= $100 - $80 = $20
Contribution margin ratio = Contribution margin per unit / Sales price * 100
= $20 / $100 * 100 = 20%
2. Contribution margin format
| Particulars | Amount ($) |
| Sales price (40,000*$100) | 4,000,000 |
| Variable cost (40,000*$80) | 3,200,000 |
| Contribution margin | 800,000 |
| Fixed Expenses | 750,000 |
| Net Operating Income | 50,000 |
Breakeven point in sales units = Fixed expense / Contribution margin per unit
= $750,000 / $20 = 37,500 units
Breakeven point in dollars = Fixed expense / Contribution margin ratio
= $750,000 / 20% = $3,750,000
4. Contribution margin format
| Particulars | Amount ($) |
| Sales price (37,500*$100) | 3,750,000 |
| Variable cost (37,500*$80) | 3,000,000 |
| Contribution margin | 750,000 |
| Fixed Expenses | 750,000 |
| Net Operating Income | 0 |
5. Performance level in unit sales = (Fixed cost + Desired profit) / Contribution margin per unit
= ($750,000 + $100,000) / $20
= $850,000 / $20
= 42,500 units
In: Accounting
Risk assessment calculations
Baseline information: 40,000 units sold at a unit selling price of $100,
variable costs of $80 per unit, fixed costs of $750,000
1. Calculate the contribution margin per unit in dollars and as a percentage
2. Prepare a financial report in the contribution margin format
Calculate the breakeven point in dollars and unit sales
4. Prove the validity of the breakeven calculation by preparing a financial
report using the contribution margin format
5. Calculate the performance level in unit sales to earn net income of
$100,000
6. Prove the validity of the desired net income calculation by preparing a
financial report using the contribution margin format
7. Calculate the degrees of operating leverage
ithout preparing a financial report, calculate the increase in net income
f the number of units sold increased by 10%
9. Prove the validity of the operating leverage calculation by preparing a
financial report using the contribution margin format and assuming a 10%
increase in units sold
What-if calculation
Calculate net income resulting from these changes to the baseline
information: units sold and selling price remained the same, variable costs
were increased by $10, and fixed costs were decreased by $250,000
In: Accounting