Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31 Marshall Inc. estimated the following operating results:

The company is evaluating a proposal to manufacture 27,200 units instead of 24,800 units, thus creating an Inventory, October 31 of 2,400 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.

a. 1. Prepare an estimated income statement, comparing operating results if 24,800 and 27,200 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank or enter “0”.

a. 2. Prepare an estimated income statement, comparing operating results if 24,800 and 27,200 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank or enter “0”.

1. break down a television set into the 5 inventory categories (raw materials, work-progress, finished goods,goods in transit, annd returns)

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 5%, and you believe the following probability distribution for future market returns is realistic:

What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)

r_i = 4.4% + (5.9%)b_i

r_i = 5.0% + (4.9%)b_i

r_i = 2.3% + (6.1%)b_i

r_i = 5.0% + (5.9%)b_i

r_i = 4.4% + (4.9%)b_i

-Select-IIIIIIIVV

Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.
%

Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.4. Should Kish invest in the new company?
The new stock -Select-should notshould be purchased.

At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.

Since the SUTA rates changes are made at the end of each year and there is much discussion about changes to the FUTA rate, the available 2017 rates were used for FUTA and SUTA.

Note: For this textbook edition the rate 0.6% was used for the FUTA tax rate for employers.

Example 5-1

Parlone Company has paid wages of $4,000 to an employee in State A. During the year, the employee is transferred to State B, which has a $7,000 taxable salary limitation for its state unemployment tax. The company has a credit of $4,000 against this $7,000 limit. Thus, the company has to pay State B's unemployment tax on only the next $3,000 of wages earned by that worker in State B during the remainder of the calendar year.

In April of the current year, Freeman Steel Company transferred Herb Porter from its factory in Nebraska to its plant in Ohio. The company's SUTA tax rates based on its experience ratings are 3.2% in Nebraska and 3.8% in Ohio. Both states base the tax on the first $9,000 of each employee's earnings. This year, Freeman Steel Company paid Herb Porter wages of $19,500; $3,000 were paid in Nebraska and the remainder in Ohio. Compute the following: round your answers to the nearest cent.

a. Amount of SUTA tax the company must pay to Nebraska on Porter's wages
$________

b. Amount of SUTA tax the company must pay to Ohio on Porter's wages
$________

c. Amount of the net FUTA tax on Porter's wages
$_________

Since the SUTA rates changes are made at the end of each year and there is much discussion about changes to the FUTA rate, the available 2018 rates were used for FUTA and SUTA.

Note: For this textbook edition the rate 0.6% was used for the net FUTA tax rate for employers.

Example 5-1

Parlone Company has paid wages of $4,000 to an employee in State A. During the year, the employee is transferred to State B, which has a $7,000 taxable salary limitation for its state unemployment tax. The company has a credit of $4,000 against this $7,000 limit. Thus, the company has to pay State B's unemployment tax on only the next $3,000 of wages earned by that worker in State B during the remainder of the calendar year.

In April of the current year, Freeman Steel Company transferred Herb Porter from its factory in Nebraska to its plant in Michigan. The company's SUTA tax rates based on its experience ratings are 3.2% in Nebraska and 3.8% in Michigan. Both states base the tax on the first $9,000 of each employee's earnings. This year, Freeman Steel Company paid Herb Porter wages of $20,900; $2,800 were paid in Nebraska and the remainder in Michigan. Compute the following:

Round your answers to the nearest cent.

a. Amount of SUTA tax the company must pay to Nebraska on Porter's wages
$

b. Amount of SUTA tax the company must pay to Michigan on Porter's wages
$

c. Amount of the net FUTA tax on Porter's wages
$

Suppose Toyota Corp. and Honda Corp. are deciding whether to make mobile wifi a standard feature on next year’s economy-size car models. If both firms make wifi standard, Toyota will earn $5 billion in profit and Honda will earn $5.2 billion in profit. If neither adopts wifi as standard, then Toyota will earn $6 billion in profit and Honda will earn $3.8 billion in profit. If Toyota adopts the technology and Honda doesn’t, then Toyota will earn $4 billion in profit and Honda will make a loss of $2 billion. If Honda adopts the technology and Toyota doesn’t, then Honda will earn $2.5 billion in profit and Toyota will make a loss of $0.5 billion. These profits are all the companies care about.

(i) Suppose this is a simultaneous decision. Create a game table illustrating the above scenario, where each player’s payoff is its profit.

Suppose you are a strategic consultant for Honda Corp. Based on the above table, explain in common language what recommendation you would give to Honda? Do either of the firms have a dominant strategy? What is the Nash equilibrium? Use and explicitly refer to the information from your table in your answer.

(ii) Suppose this is a sequential decision, with Toyota Corp. as the first mover. Create a game tree illustrating the above scenario, where each player’s payoff is its profit.

Suppose, again, that you are a strategic consultant for Honda Corp. Based on the above tree, explain in common language what Honda should do? What is the rollback equilibrium? Use and explicitly refer to the information from your tree in your answer.

(1) Read in the data and create an R data frame named tennis.dfr 
that has the following names for its columns:  first.name, last.name,
major.match.wins, major.match.losses, overall.match.wins, 
overall.match.losses, major.titles, overall.titles.  (Note that the 
data file has several explanatory lines before the real data begin 
that should be skipped when reading in the data lines.)
NOTE:  For the file name, you must use the following web address (URL): 
"http://people.stat.sc.edu/hitchcock/tennisplayers2018.txt".  
Please do not have your code read in the file from your own personal directory.

(2) Create and add two more columns called major.winning.pct and 
overall.winning.pct (showing winning percentage in the "major" and 
"overall" categories, respectively) to this data frame.
  
Note that "winning percentage" is defined 
as (match wins)/(match wins + match losses).

(3) Sort the data frame by major titles, from most to least.  
Have your program print the sorted data frame.

(4) Perform a nested sort, sorting the data frame first by major
titles (from most to least), and then by major winning percentage 
(from most to least) within major-title levels.
Have your program print this sorted data frame.

(5) Have R extract the subset of the data frame consisting of players
with at least 6 major titles.  Call this new data frame: greatest.dfr
Have your program print this new data frame.

(6)  In the most efficient way possible, have R calculate the sample means 
for each of the numeric variables in the tennis.dfr data set.
(Hint: Extract the appropriate subset of the data frame first.)

(7) Use the write.table() function to write the data set tennis.dfr to an
external file simply called "tennisdata.txt".  Make sure the external file includes the column names.
Also, make sure the players' names are NOT surrounded by quotes in the 
external file.

1. Apply What You’ve Learned - Managing Income Taxes

Demonstrate your knowledge of the U.S. tax system by answering the following questions:

Experts describe the U.S. tax system as being a progressive system. This means that:

every taxpayer in the United States pays the same tax rate on their taxable income.

a smaller tax rate is applied to the last dollar of earned income than on the first dollar of taxable income.

a greater tax rate is applied to the last dollar of taxable income than on the first dollar of taxable income.

only those taxpayers that earn income will incur income taxes.

Which of the following equations represent the correct formula for computing a taxpayer’s taxable income? Check all that apply.

Taxable income = Total income - Adjustments to income - Deductions - Exemptions

Taxable income = Gross income - Adjustments to income - Deductions - Exemptions

Taxable income = Adjusted gross income - (Deductions + Exemptions)

Taxable income = Total income - Exclusions

Taxable income = Adjusted gross income - Tax credits

Taxable income = Total income + Deductions and Exemptions

Taxable income = Gross income - Adjustments

Taxable income = Gross income - Exclusions

Which of the following must be included in the computation of a taxpayer’s taxable income?

Interest and dividend income

Inherited money or property

Veterans’ benefits

Social security benefits

Home ownership can provide significant income tax savings compared to renting a comparable home. This is because a taxpayer’s tax deductible.

The contributions or expenses associated with cannot be paid with pre-tax dollars, and therefore, cannot reduce your taxable income

Money placed in a flexible spending account to pay for out-of-pocket unreimbursed expenses for medical and dental fees

may be subtracted as an adjustment to gross income.

may be subtracted as a credit from taxable income

may be included in itemized deductions

should be considered to be taxable income

Which of the following is not considered to be a tax sheltered investment?

The contribution to a flexible spending account.

An investment in a Coverdell education savings account

An investment in tax-exempt municipal bonds

An investment in a mutual fund

Why is a refundable tax credit more valuable than a tax deduction or a nonrefundable tax credit?

It may reduce your tax liability to below zero (provide a refund).

It reduces tax liability by one dollar for every dollar of the credit.

It may be taken even if you do not itemize deductions.

All of these are reasons.