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The city council has approved the building of a new bridge over Running Water Creek. The bridge will cost $17,000 for initial construction and have an annual maintenance cost of$1,000. The council plans to withdraw money from the city’s Bridges and Highways account to open a special account to cover the initial construction and to fund a perpetuity to cover the maintenance costs forever. How much money must be withdrawn from the Bridges and Highways account if the city can expect to earn 5 percent on the special account?
Caputo Company prepared the following budgeted income statement for the first quarter of 2018:
CAPUTO COMPANYBudgeted Income StatementFor the Quarter Ended March 31, 2018
Net Sales Revenue(20% increase per month)Cost of Goods Sold(50% of sales)Gross ProfitS&A Expenses($3,000 + 5% of sales)Operating IncomeIncome Tax Expense (30% of operating income)Net IncomeJanuary$10,0005,0005,0003,500$1,500450$1,050February$12,0006,0006,0003,600$2,400720$1,680March$14,4007,2007,2003,720$3,4801,044$2,436Total$36,40018,20018,20010,820$7,3802,214$5,166
Caputo Company is considering two options. Option 1 is to increase advertising by $1,100 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 55% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 25% per month rather than 20%.
- Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain$10,000. Round all calculations to the nearest dollar.
- Which option should Caputo choose? Explain your reasoning.
Decide which method (theoretical, relative frequency, or subjective) is appropriate, and compute or estimate the following probability. If you use the subjective method, explain your reasoning. Randomly meeting someone born in a month beginning with a vowel (assume 365 days in a year)