which of the following statements is not true of the federal arbitration act (faa)? multiple choice it spells out specific procedures and formats for conducting arbitration proceedings. it provides grounds for setting aside arbitrators' rulings. it offers a means for enforcing arbitration agreements. it provides a means for enforcing arbitrators' decisions through the use of federal courts.
Answers
"It spells out specific procedures and formats for conducting arbitration proceedings." is not true of the federal arbitration act . So, correct option is A.
The Federal Arbitration Act (FAA) is a federal law that governs the use of arbitration to resolve disputes. The act was enacted in 1925 to ensure the enforceability of arbitration agreements in commercial contracts.
The statement (A) is not true. The FAA does not provide specific procedures or formats for conducting arbitration proceedings. Instead, it establishes a general framework for the enforcement of arbitration agreements and awards.
The FAA provides for the enforcement of arbitration agreements and awards, even if they conflict with state laws. The act allows parties to bypass the traditional court system and resolve disputes through arbitration. The FAA also provides a means for enforcing arbitrators' decisions through the use of federal courts, as stated in statement (D).
The FAA also provides limited grounds for setting aside an arbitrator's ruling. These include fraud, corruption, or misconduct by the arbitrator, or if the award is not based on the contract or is in violation of public policy.
In summary, the FAA establishes a framework for the enforceability of arbitration agreements and awards, provides a means for enforcing arbitrators' decisions through the use of federal courts, and provides limited grounds for setting aside an arbitrator's ruling.
So, correct option is A.
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Related Questions
When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.
Answers
It should be noted that When there is under application of overhead a credit must be made.
What is Overhead?Overhead can be regarded as the ongoing business expenses which cannot be attributed directly attributed to creating a product or service.
It is required for budgeting purposes and if underapplied, credit must be made to the Manufacturing overhead account to close it out.
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A house is constructed in a neighborhood that is substantially larger than the existing houses. Based on the value principle of ___________________, the larger house’s value will therefore be adversely affected.
a. anticipation
b. conformity
c. inadequacy
d. competition
Answers
You cannot purchase a cable subscription for single channels like the Food Network or Cartoon Network because cable companies:
a. act like perfectly competitive firms.
b. are not interested in maximizing their profits.
c. have no market power to sell individual channels.
d. act like monopolies.
e. are pressured by the government to provide channel packages.
Answers
Cable companies have no market power to sell individual channels. (option C)
Cable companies typically bundle channels together to maximize their profits and offer a variety of channels at different price points. While some consumers may prefer to only pay for the channels they want, cable companies have no incentive to offer this option as it would likely result in lower profits. However, with the rise of streaming services and increasing competition from other media providers, cable companies may be forced to re-evaluate their business models and pricing strategies in the future.
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which theory assumes that people are active agents who make deliberate choices among media?
Answers
The theory that assumes that people are active agents who make deliberate choices among media is the Uses and Gratifications theory. This theory proposes that individuals choose and use media for specific purposes, needs, and desires. It assumes that people are not passive receivers of media messages but are active agents who can decide what media content they consume, when and how they consume it, and how they use it to satisfy their needs.
The Uses and Gratifications theory emphasizes that media users have a range of individual motives for media consumption, including entertainment, social interaction, information seeking, personal identity, and psychological needs. Therefore, individuals' media choices are deliberate and based on their specific goals and preferences. The theory suggests that the media's impact depends on the users' motivations, expectations, and situational factors.
Moreover, the Uses and Gratifications theory emphasizes that media use is not a one-way process; it is a reciprocal relationship between users and media. In other words, media users can actively shape media messages, as well as be influenced by them.
In conclusion, the Uses and Gratifications theory is a significant approach that recognizes individuals as active agents who make deliberate choices among media. It highlights the importance of understanding why and how people use media to satisfy their specific needs and how these choices affect the media's impact on their attitudes, beliefs, and behaviors.
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true or false the first step in the strategic management process is to set long-range goals and objectives.
Answers
True, the first step in the strategic management process is to set long-range goals and objectives.
The strategic management process is a comprehensive and structured approach that organizations use to plan, execute, and review their long-term strategies. This process typically begins with setting long-range goals and objectives, which are essential in providing a clear direction and framework for the organization to achieve its desired outcomes. These long-range goals and objectives help the organization focus its resources and efforts, identify potential opportunities and challenges, and align its overall operations with the intended strategic direction.
Once the long-range goals and objectives have been established, the organization moves on to other stages in the strategic management process. These stages include conducting an internal and external analysis, formulating strategies based on this analysis, implementing the chosen strategies, and continuously evaluating and monitoring their effectiveness. Throughout this process, adjustments and refinements may be made as needed to ensure that the organization remains on track towards achieving its goals.
In summary, the strategic management process is essential for organizations to effectively plan and achieve their long-term goals. The first step in this process is to set long-range goals and objectives, which serve as the foundation for all subsequent stages of strategic planning and implementation.
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1. Bulk breaking is a primary function of a ________.
2. A _______ stores goods on a rental basis.
3. A _____ is like a small manufacturing plant.
4. A storage facility that stores goods for a short period of time is called a ________.
5. A storage facility that assembles products is called a _________.
Answers
One of a wholesaler's key responsibilities is bulk breaking. A public warehouse is a location where products are kept in storage for a brief time.
What use does bulk breaking serve?Companies can store big amounts of product without having to pay for expensive storage facilities by breaking bulk, which is a straightforward operation. Businesses can reduce their bulk purchases by combining different product sizes, dividing large shipments into smaller lots, or mixing multiple brands in the same lot.
Is breaking bulk a retailing function?Breaking bulk in this context refers to delivering individual units from distribution centres to retail locations as opposed to the multiple units assembled by manufacturers into "case-packs." The advantages of space management are mostly highlighted at rather than the more evident decrease in inventory costs, at the retail level.
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Gordon is over 65 what is his adjusted gross income
Answers
Answer:
huh
Explanation:
hbybibhbil
Sal needs to figure out how to schedule employees to cover shifts at the hospital during the holidays. He needs to be sure that there are enough doctors, nurses, janitors, receptionists, lab technicians, and radiologists on staff so that any emergency would not put the hospital into crisis mode. Even though billing and intake are not critical to emergencies they also will need coverage. How will sal figure out how many staff he needs to keep the hospital functional throughout the holidays?.
Answers
Sal uses management science to determine how many employees he needs to keep the hospital operating during the holidays.
Sal can use management science to apply scientific methods and statistical methodologies to enhance strategic decision-making. That will aid Sal in determining the ideal mix of medical and non-medical employees needed throughout the holidays.
Any scientific method used to examine management science is referred to as management science. The word "management science" (frequently used in the plural), which was once used to refer to operations research, now denotes a separate discipline. Operations research provides analytical data, statistics, and methodologies to boost management system effectiveness; management science applies these skills to areas including data mining, engineering, economic forecasting, and logistics.
Operations research, systems analysis, and the study of management-information systems were all included in the early definition of management science, which was any application of science to management issues or the management process itself. The Institute of management science (TIMS), a development of the Operations Research Society of America, was established in 1953 and its constitution reflects this comprehensive concept of the field's breadth (ORSA). The "goals of the Institute shall be to identify, extend, and converge scientific knowledge that contributes to the understanding and practice of management" were declared in the statement.
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The McCumber Cube for Data Privacy has multiple dimensions; which of the following is NOT a dimension used to organize a privacy policy?
-use of information
-countermeasures
-state of information
-desired information goals
Answers
"Desired information goals" is NOT a dimension.
Which dimension is NOT used?.The dimension that is NOT used to organize a privacy policy in the McCumber Cube for Data Privacy is "desired information goals." The McCumber Cube consists of three dimensions used to organize a privacy policy, which are:
Use of information: This dimension focuses on how the collected information will be used and the purposes for which it will be processed.Countermeasures: This dimension involves the security measures and safeguards implemented to protect the privacy of the collected information from unauthorized access or disclosure.State of information: This dimension pertains to the different states of information, such as its collection, storage, processing, sharing, and disposal.The "desired information goals" is not one of the dimensions used in the McCumber Cube for Data Privacy.
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Business strategy, as a level of the company's strategy-making process, is Multiple choice question. the strategic initiatives and approaches for managing key operating units and specific operating activities. focused on improving the competitive strength of a single business unit or nondiversified business. concerned with the actions related to particular functions or processes within a business. the overall companywide game plan for managing a set of businesses.
Answers
Answer:
concerned with the actions related to particular functions or processes within a business. the overall companywide game plan for managing a set of businesses.
Explanation:
Business strategy, as a level of the company's strategy-making process, is Multiple choice question. the strategic initiatives and approaches for managing key operating units and specific operating activities. focused on improving the competitive strength of a single business unit or non diversified business. co
List the five most common functions of business reports for an
organisation that manufactures electric cars for 1, 2 or 4
passengers. Name the users and the stakeholders involved in each
function.
Answers
The five most common functions of business reports for an organization that manufactures electric cars for 1, 2, or 4 passengers, along with the users and stakeholders involved.
Are as follows: Sales and Marketing Analysis:
Users: Sales and marketing teams, executives.
Stakeholders: Customers, dealerships, investors, shareholders.
Production and Inventory Management:
Users: Operations managers, production teams.
Stakeholders: Suppliers, logistics partners, investors.
Financial Performance Evaluation:
Users: Finance department, executives.
Stakeholders: Investors, shareholders, lenders, regulatory authorities.
Quality Control and Product Development:
Users: Quality control teams, research and development teams.
Stakeholders: Customers, regulatory authorities, investors.
Sustainability and Environmental Impact Assessment:
Users: Environmental compliance teams, sustainability managers.
Stakeholders: Regulatory authorities, customers, environmental organizations, investors. These functions and their corresponding reports serve different purposes and cater to various users and stakeholders within and outside the organization. By analyzing these reports, decision-makers can make informed choices, assess performance, ensure quality, drive innovation, and address sustainability concerns in the manufacturing and marketing of electric cars.
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Select the correct answer.
What is the minimum educational requirement for a pediatric psychopharmacologist?
A. MD
B. PhD
C. bachelor’s in medicine
D. master’s in medicine
E. PsyD
THE ANSWER IS A(md)
Answers
Is profit the same as cash flow?
Answers
Answer:
No
Explanation:
Cash flow refers to the money that flows in and out of your business. It's income and expenses.
Profit, however, is the money you have after deducting your business expenses from overall revenue. Both are important, but cash flow is essential to keep your business running in the here and now.
ayayai corp. has assets of $4424000, common stock of $1086000, and retained earnings of $626000. what are the creditors’ claims on their assets? $2026000 $4042000 $4896000 $2712000
Answers
Creditors' claims on Ayayai Corp.'s assets amount to $4,042,000.Creditors' claims on a company's assets are calculated by subtracting the total stockholders' equity from the total assets.
In this case, the assets of Ayayai Corp. are $4,424,000, and the stockholders' equity consists of common stock worth $1,086,000 and retained earnings of $626,000. Subtracting the stockholders' equity from the total assets gives us $4,424,000 - ($1,086,000 + $626,000) = $4,042,000. This means that creditors have a claim of $4,042,000 on Ayayai Corp.'s assets.
Creditors' claims on a company's assets represent the amount owed to external parties, such as lenders and suppliers, in the event of liquidation. It's important to differentiate between stockholders' equity, which represents the ownership interest of the company's shareholders, and the claims of creditors. Stockholders' equity includes common stock and retained earnings, which are the accumulated profits of the company that have not been distributed to shareholders.
To calculate creditors' claims, we start with the total assets of the company. In this case, Ayayai Corp. has assets worth $4,424,000. Then, we subtract the stockholders' equity, which consists of common stock ($1,086,000) and retained earnings ($626,000). By subtracting the stockholders' equity from the total assets, we find that creditors' claims amount to $4,042,000. This represents the portion of the assets that is not owned by the shareholders, but rather owed to external parties.
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A passive fund manager would be most likely to do which of the following ?A- Research the stocks in the benchmakr's portfolio extensively so as to align with itB- Align with both the market and individual funds by using competitive informationC- Beat the Benchmark Index performance by achivieng a higher returnD- Match the fund's performance to the benchmark index 's performance
Answers
A passive fund manager would be most likely to do Match the fund's performance to the benchmark index's performance. Thus the correct option is D.
What is a Passive fund?Funds that are managed passively stick to an index. High turnover may potentially be a problem for passively managed funds since the fund will experience it if the index experiences it. It results in lower risk, flexibility, effective tax rates, and ease of use.
An objective of a passive fund manager is to monitor the performance of a specific index or stock market. The index that passive managers are seeking to track and use to rebalance the fund are at odds with one another.
Therefore, option D is appropriate.
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suppose it takes policy makers from time to time to take an action to stimulate the economy. this is an example of
Answers
Suppose it takes policy makers from time to time to take an action to stimulate the economy. this is an example of implementation lag.
Why is having a policy important? What is a policy?It is the connection between a company's mission, core principles, and daily activities. Policies outline important tasks and provide direction for decision-makers on how to address problems as they develop. A protocol details a particular course of action to implement a policy.
What aims does policy pursue?Mission, values, and strategic goals are all distilled into policies, along with the law, at the top of the hierarchy. More specific than strategic objectives, policies define boundaries for behavior and actions that must occur in order to achieve their stated objectives.
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The demand curve for a monopolistically competitive firm is:
a. perfectly elastic.
b. elastic.
c. inelastic.
d. perfectly inelastic.
Answers
Option (b), The demand curve for a monopolistically competitive firm is elastic.
What is Monopolistic competition?Monopolistic competition is a sort of imperfect competition that combines elements of monopoly and perfect competition. It is distinguished by the existence of many sellers who sell goods or services that are somewhat different, but not entirely alike, as well as the presence of non-price competitive behaviour.
A demand curve is a line that plots the quantity of a product that a consumer would buy at various price points. The elasticity of a demand curve determines how consumers react to changes in the price of a commodity. Inelastic demand indicates that a change in price does not significantly impact the quantity purchased. On the other hand, elastic demand indicates that a price shift has a significant effect on the amount purchased.
The demand curve for a monopolistically competitive firm is elastic because the firm has competitors selling similar goods. This implies that if the monopolistically competitive firm raises its price, the buyers may choose to buy from its rivals instead, and if it lowers its price, the buyers may switch back to the firm's products. As a result, the firm's pricing strategy has a significant effect on the quantity of products that the firm can sell.
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how companies collude in South Africa
Answers
Collusion among companies in South Africa is an illicit practice of working together, often in secret, to increase their profits at the expense of consumers. Collusion typically takes the form of price fixing, where businesses agree to set prices at an artificially high level, or bid rigging, where companies agree to submit inflated bids for contracts.
Companies can collude in various ways in South Africa. First, firms can engage in cartel agreements, where they agree on pricing and output. This results in reduced competition and higher prices. Second, firms can engage in bid rigging, where they collude to manipulate the tendering process. This results in inflated contract prices and reduced competition. Third, firms can engage in market sharing, where they agree to divide up the market among themselves. This results in reduced competition, increased prices, and less choice for consumers.
Collusion is illegal in South Africa under the Competition Act 89 of 1998. The Act aims to promote competition in the South African market and prevent anti-competitive behavior. Companies that are found guilty of collusion can face hefty fines and legal action. Additionally, individuals who are found guilty of collusion can be imprisoned for up to 10 years.
In conclusion, collusion among companies in South Africa is a serious problem that reduces competition and harms consumers. It is important for companies to compete fairly and abide by the Competition Act to ensure a level playing field for all businesses and a fair deal for consumers.
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How does specialization affect international trade
Answers
Specialization can affect international trade because with many goods and countries, it means a country has some goods it does not and cannot competitively produce.
Why is trade specialization important?Trade benefits from specialization since it benefits both parties to trade agreements. Both countries will be able to boost the overall output in their respective countries while also saving time and resources. When nations trade with one another, trade benefits result.
The ability to produce more goods and services, increase productivity, push beyond a country's production possibilities curve, and finally make better use of resources are all advantages of specialization. In order to increase efficiency, specialization is a method of production whereby an organization concentrates on producing a small range of items.
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QUESTION 3 / 10 What is the first step you should take when you want to open a savings account? A. Review the different savings account options that your bank offers. B. Make your initial deposit. C. Go to the bank and fill out an application. D. Present your photo ID to the bank representative.
Answers
Answer:
A. Review the different savings account options that your bank offers.
According to the video, which workers traditionally become Construction Managers?
help plsssssssssssssssssssssssssss
Answers
Answer:
A is the answer
Answer:
the answer is construction craftspeople with many years of experience
Explanation:
Are the following statements true or false? Explain in each case.
“Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”
“Certain very talented people have a comparative advantage in everything they do.”
“If a certain trade is good for one person, it can’t be good for the other one.”
“If a certain trade is good for one person, it is always good for the other one.”
“If trade is good for a country, it must be good for everyone in the country.”
Answers
1. True. Even if one country has an absolute advantage in the production of all goods, both countries can still benefit from trade if the other country has a comparative advantage in the production of certain goods.
2. False. Even the most talented people are not good at everything but they might be better at some things than others, but they cannot be excellent at everything.
3. False. Trade can be beneficial for both parties involved.
4. False. Trade can be beneficial for one party but not necessarily for the other.
5. False. International trade can have negative consequences for certain groups of people.
When acting as a dual agent, a licensee shall not:
Select one:
a. Disclose all latent material defects in the property that are
known to the licensee.
b. Help the buyer compare financing alternatives.
C. Disclose the price the buyer or tenant is willing to pay
without the permission of the buyer or tenant.
d. Provide information about comparable properties that
have sold so both clients may make educated decisions on
what price to accept or offer.
Answers
Answer:
C. Disclose the price the buyer or tenant is willing to pay
without the permission of the buyer or tenant.
Explanation:
A Dual agent refers to one agent or an agency firm that represents both the buyers and seller in the same transaction. An Agent may be licensed to act as a dual agent only with the written consent of both the buyers and seller. The dual agent must do be neutral to both parties and must not disclose any confidential information to either party.
1. what are the six different versions of project management software offered by microsoft? briefly describe how they differ and who uses them.
Answers
Microsoft offers six different versions of project management software, including Project Plan 1, Project Plan 3, Project Plan 5, Project Online Essentials, Project Online Professional, and Project Online Premium.
Project Plan 1:
is the basic version of the software, designed for small teams and individual users. It includes task management, collaboration features, and basic reporting.
Project Plan 3:
is a more advanced version of the software, designed for larger teams and organizations. It includes resource management, advanced reporting, and integration with other Microsoft tools like Excel and SharePoint.
Project Plan 5:
is the most comprehensive version of the software, designed for enterprise-level organizations. It includes advanced analytics, portfolio management, and enterprise-level security features.
Project Online Essentials:
is a cloud-based version of the software, designed for small businesses and individual users. It includes basic project management features and is accessible through a web browser.
Project Online Professional:
is a more advanced cloud-based version of the software, designed for larger teams and organizations. It includes resource management, advanced reporting, and integration with other Microsoft tools.
Project Online Premium:
is the most comprehensive cloud-based version of the software, designed for enterprise-level organizations. It includes advanced analytics, portfolio management, and enterprise-level security features.
Overall, these different versions of project management software offer varying levels of features and capabilities to meet the needs of different organizations and teams. Small businesses and individual users may opt for the basic or cloud-based versions, while larger organizations with more complex project management needs may opt for the more comprehensive versions.
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Randy and Kim divided their 30-acre property into three 10-acre parcels (lots A, B, and C). A and C can only access the public road through B. The buyers of A and C will probably be granted what type of easement by court action?
Answers
Answer: Easement by necessity
Explanation: Easement may be referred to as a right granted to an individual to make use of another person's property or land such that the individual would not be penalized for trespassing. The easement by necessity is usually granted by a legal body, that is a court of law, granting an individual a legal pass or authority to move or travel over another person's land without penalty. This is uaually the case when it becomes a must and there is no other means by which the individual can access his or her own property except by passing or traveling through another property. In the scenario above, the owners of land A and C will be granted easement of necessity which will allow them to travel through land B without being penalized in other to access their own property.
For the tax year, Ashes to Dust, a partnership, reported a $75,000 ordinary loss and a $29,000 increase in recourse liabilities for which the partners are liable. Dustin, a 50% partner, had an adjusted basis of $16,000 at the beginning of the year. What is Dustin's allowable loss and his adjusted basis in Ashes to Dust at the end of the year? a. Allowable loss: $8,000. Adjusted basis: $7,000. b. Allowable loss: $16,000. Adjusted basis: $0. c. Allowable loss: $30,500. Adjusted basis: $0
Answers
Dustin's allowable loss is $30,500. and his adjusted basis is $0 in Ashes to Dust at the end of the year. Option c. Allowable loss: $30,500. Adjusted basis: $0 is correct.
To calculate Dustin's allowable loss and adjusted basis in Ashes to Dust, we need to consider his share of the partnership's loss and any changes in his adjusted basis.
Allowable Loss:
Dustin's allowable loss is determined by his percentage share in the partnership. In this case, Dustin is a 50% partner. Therefore, his allowable loss would be 50% of the partnership's ordinary loss of $75,000, which is $37,500.
Adjusted Basis:
The adjusted basis at the beginning of the year was given as $16,000. We need to account for the increase in recourse liabilities for which the partners are liable. The increase in recourse liabilities was $29,000.
Since the partners are liable for the recourse liabilities, Dustin's adjusted basis is reduced by his share of the increase. Since Dustin is a 50% partner, his share of the increase in recourse liabilities is 50% of $29,000, which is $14,500.
To calculate Dustin's adjusted basis at the end of the year, we subtract his allowable loss from his adjusted basis at the beginning of the year:
Adjusted Basis at the end of the year = Adjusted Basis at the beginning of the year - Allowable Loss
= $16,000 - $37,500
= -$21,500.
However, since the adjusted basis cannot be negative, Dustin's adjusted basis at the end of the year is considered zero.
Therefore, the correct answer is c. Allowable loss: $30,500. Adjusted basis: $0.
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Which of these is not affected by a person's credit score?
A. Apartment rentals
B. Credit card rates
C. Ability to get a cell phone contract
D. Federal income tax
Answers
How many business days after you submit your application will you receive a loan estimate form?.
Answers
Within three business days after you submit your application will you receive a loan estimate form.
A Loan Estimate is a three-page form that you receive after making use of a mortgage. The mortgage Estimate tells you crucial information about the loan you've got requested. The lender ought to offer you a mortgage Estimate within three enterprise days of receiving your utility. The Loan Estimate is a shape that took impact on Oct.
The mortgage estimate let you apprehend any mortgage you follow, whether you're buying a domestic or refinancing one. For the amount, kind, and term of the loan you've implemented, the loan estimate will show your projected final prices, monthly price, interest charge, and annual percentage charge, amongst different info.
The Loan Estimate has to be provided to purchasers no later than three enterprise days when they post a mortgage application. the second shape (final Disclosure) is designed to provide disclosures as a good way to be useful to customers in understanding all the fees of the transaction.
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Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 57,000 units of RX5 follows. Direct materials $ 5.00 Direct labor 9.00 Overhead 10.00 Total costs per unit $ 24.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 57,000 units of RX5 for $20.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5.
Answers
Answer
Making the product 922,000
Buying the product 1,140,000
Explanation:
Total Incremental Costs of:
Making the Units Buying the Units
Direct Material295,000 (5*57000)
Direct Labor 513,000
(9*57000)
Overhead 114,000
(10-(10*80%)*57000
Purchase Price 1,140,000 (20*57000)
Total Costs 922,000 1,140,000
Answer:
To Make Incremantal Costs = $ 912,000
To Buy Incremental Costs = $ 1,140,000
Explanation:
incremental costs of making and buying component RX5
To Make Incremantal Costs
Direct materials $ 5.00 × 57,000 units 285,000
Direct labor $9.00 × 57,000 units 513,000
Overhead $10.00 × 20% × 57,000 units 114,000
Totals 912,000
To Buy Incremental Costs
Purchase Price $20.00 × 57,000 units 1,140,000
Totals 1,140,000
Note : Fixed Overheads have been excluded as they are incurred whether or not the Haver Company makes or buys the component RX5. Thus not incremental.
Carl’s business insurance costs $3,000 per year. Carl paid for and purchased a 12-month insurance policy on October 1, Year 1. On October 1, Year 2, Carl’s insurance increased to $3,300 per year. A building contract Carl was working on was delayed when they had to obtain additional permitting. Because cash flow was tight, Carl delayed renewing the insurance policy. Instead of making the payment due on October 1, Year 2, Carl paid 3 months of insurance in arrears on January 1, Year 3. Carl is a cash-method taxpayer and took advantage of the 12-month rule in Year 1 for prepayments. What is Carl’s insurance expense deduction for Year 2?
Answers
Answer:
Carl's Insurance Expense Deduction for Year 2
Since he took advantage of the 12-month prepayments rule, his Year 2 Insurance deduction was deducted in Year 1.
While his deduction should have been equal to
= Annual Insurance Expense/12 x 9 = $3,300/12 x 9 = $2,475
In Year 2, it is equal to $0 since he did not make any payment for Insurance.
Explanation:
Under the cash method of accounting, two rules govern how someone can deduct prepaid expenses:
1. The General Rule
2. The 12-Month Rule
1. The General Rule
Under the general rule, you cannot deduct the full amount of an advance payment covering more than 12 months. You must deduct a portion of the payment in the year to which it applies.
Example: The General Rule.
Carl is a cash method taxpayer on a calendar year.
On October 1, 2018 Carl pays $3,600 in advance for business insurance covering three years.
Coverage begins October 1, 2018.
Coverage ends September 30, 2021.
Result:
The general rule applies.
The advance payment covers more than 12 months (36 months).
A portion of the $3,600 must be deducted ratably over the three-year period.
To find the portion of the $3,600 Carl deduct each tax year:
First, divide the $3,600 by 36 (months) to find the monthly premium amount.
Then, multiply the number of months remaining in each tax year by the monthly premium
Monthly premium: $3,600 / 36 = $100 per month.
Oct. 1, 2018 - Dec. 31, 2018: 3 x $100 = $300 deduction for 2018
Jan. 1, 2019 - Dec. 31, 2019: 12 x $100 = $1,200 deduction for 2019
Jan .1, 2020 - Dec. 31, 2020: 12 x $100 = $1,200 deduction for 2020
Jan. 1, 2021 - Sep. 30, 2021: 9 x $100 = $900 deduction for 2021
The 12-Month Rule
The 12-month rule says that Carl may deduct the full amount of an advance payment in the year the payment is made if it creates rights or benefits for the taxpayer that do not extend beyond the earlier of:
12 months after the right or benefit begins, or
The end of the tax year after the tax year in which payment is made.
Example 1: The 12-Month Rule.
Carl is a cash basis taxpayer on a calendar year.
On October 1, 2018 he pays $2,000 for business insurance covering one year.
The policy begins October 1, 2018 and ends September 30, 2019.
Result:
The 12-month rule applies.
Deduct the full $2,000 in 2018
The benefit does not extend beyond 12 months after the right to receive the benefit begins - October 1, 2018.