A commonly used continuous probability distribution that isdiscribed by a distribution curve similar to a normal curve. Thecurve is symetrical about zero and is more spread out. a. confidence level b. degrees of freedom c. margin of error d. t distribution What is the correct answer ?
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Problem 12-18 Parts 1, 3, 4) Relevant Cost Analysis in a Variety of Situations [LO12-2, LO12-3, LO12-4]
Andretti Company has a single product called a Dak. The company normally produces and sells 90,000 Daks each year at a selling price of $56 per unit. The companyâs unit costs at this level of activity are given below:
Direct materials | $ | 9.50 | |
Direct labor | 10.00 | ||
Variable manufacturing overhead | 2.10 | ||
Fixed manufacturing overhead | 5.00 | ($450,000 total) | |
Variable selling expenses | 2.70 | ||
Fixed selling expenses | 4.00 | ($360,000 total) | |
Total cost per unit | $ | 33.30 | |
A number of questions relating to the production and sale of Daks follow. Each question is independent.
Required:
1-a. Assume that Andretti Company has sufficient capacity to produce 121,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 90,000 units each year if it were willing to increase the fixed selling expenses by $100,000. What is the financial advantage (disadvantage) of investing an additional $100,000 in fixed selling expenses?
1-b. Would the additional investment be justified?
3. The company has 900 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?
4. Due to a strike in its supplierâs plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 35% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.
a. How much total contribution margin will Andretti forgo if it closes the plant for two months?
b. How much total fixed cost will the company avoid if it closes the plant for two months?
c. What is the financial advantage (disadvantage) of closing the plant for the two-month period?
d. Should Andretti close the plant for two months?
The KL Partnership is owned equally by Kayla and Lisa. At the beginning of the year, Kaylaâs basis is $20,000 and Lisaâs basis is $16,000. Partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year.
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If required, use the minus sign to indicate an ordinary business loss. If an answer is zero, enter "0".
a. Prepare an Excel spreadsheet that could be used by a CPA firm to accumulate KLâs information that would be reported on Form 1065, page 1 [Ordinary business income (loss)] and page 4 (Schedule K).
Using your spreadsheet as a source document, answer the following.
How much is the partnershipâs ordinary business income (loss) on page 1?
$.
What amount is shown on lines 1, 9a and 20 on Schedule K?
Line 1: $
Line 9a: $ 6,000
Line 20: $
b. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Kaylaâs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Kayla report on her tax return?
She reports a long-term capital gain of $$__ and ordinary income of $$_
Feedback
Partially correct
c. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Lisa âs basis in her partnership interest at the end of the year.
Basis before loss allocation: $
Ordinary loss allowed under § 704(d): $
Ending basis in interest: $
Based on this calculation, what does Lisa report on her tax return?
She reports a long-term capital gain of $ and ordinary loss of $$
d. Do the amounts you calculated in part (b) and part (c) equal the amounts shown on your Excel spreadsheet?
Yes/NO , because the spreadsheet can only be used is use to determine amounts at the partner level as long as the loss is suspended .