Ch01HWSol(6th) - Chapter 1 HW Assignment: E1-8, 13, 15, 17;...

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Chapter 1 HW Assignment: E1-8, 13, 15, 17; P1-3, 6, 11, 13, 14, 22 E1-8 Sales price per glove $475.00 Costs of producing each glove: Leather ($80 ÷ 2) $40.00 Padding ($6 ÷ 2) 3.00 Thread and other materials ($16 ÷ 8 gloves) 2.00 Rent and utilities ($650 ÷ 8 gloves) 81.25 Shipping 4.50 Total cost per glove 130.75 Profit per glove $344.25 Average profit per month ($344.25 × 8) $ 2,754 E1-13 Ending value of Smith’s investment $19,500 Beginning value of Smith’s investment 17,000 Return on Smith’s investment $ 2,500 Amount paid to Smith 3,000 Return of investment $ (500 ) The company did not maintain its capital during the year because the amount paid out ($3,000) exceeded the amount earned ($2,500). Whenev- er there is a return of investment, the capital base of a company is shrink- ing. E1-15 Rogers was more effective since it was able to sell more of its product. Consumer preference might reflect a preferred taste or better marketing. Hornsby was more efficient since it was able to produce its product at a lower cost and earn a higher profit per bottle than Rogers. Perhaps Hornsby incurred lower marketing expenses than Rogers. Hornsby was more profitable: Hornsby’s profits (425,000 × $0.15) $63,750 Rogers’ profits (500,000 × $0.10) 50,000 E1-17 a. corporations b. corporations or partnerships c. corporations d. corporations e. proprietorships or partnerships f. corporations g. partnerships h. corporations i. corporations j. proprietorships and (to a lesser degree) partnerships Chapter 1 HW Solutions Page 1
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P1-3 A. Linda Greene’s Car Dealership Profit Earned For July Resources created from sales to customers $230,000 Resources consumed: Cars $189,000 Rent 2,550 Utilities 800 Insurance 825 Maintenance 700 Advertising 1,250 Taxes and license 200 Total resources consumed 195,325 Profit $ 34,675 B. Linda earned $34,675 in July. This amount may be used by Linda to pay for personal expenses, food, housing, taxes, and so on. Some of it may be reinvested in the business. C. Linda’s return on investment for the month would be 2.89% ($34,675 ÷ $1,200,000). At this pace, her annual rate of return would be ap- proximately 35% (2.89% × 12 months). P1-6 A. Resources created from sales ($8 × 1,000) $8,000 Resources consumed: T-shirt costs ($5.50 × 1,000) $5,500 Paint ($0.50 × 1,000) 500 Rent 300 Utilities 150 Wages 800 Total cost of resources consumed 7,250 Estimated profit earned for one month $ 750 Estimated profit for first year $9,000 B. The loan officer would look at the financial information to see if the company is expected to be profitable. If the estimates of revenues and expenses are correct, the T-shirt store will enjoy resources cre- ated that exceed resources consumed. The loan officer would com-
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This note was uploaded on 09/04/2008 for the course ACC 310F taught by Professor Verduzco during the Spring '07 term at University of Texas at Austin.

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Ch01HWSol(6th) - Chapter 1 HW Assignment: E1-8, 13, 15, 17;...

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