# Evaluating strategies LO C2 If the company raises its selling price to \$240 per unit. 1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co.'s contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co.'s break-even point in sales dollars.

Instructions are below.

Explanation:

We weren't provided with enough information to answer the requirements. But, I will provide the formulas.

1) Contribution margin:

CM= selling price - unitary variable cost

2) contribution margin ratio:

contribution margin ratio= contribution margin / selling price

3) break-even point in units

Break-even point in units= fixed costs/ contribution margin per unit

4) break-even point in sales dollars:

Break-even point (dollars)= fixed costs/ contribution margin ratio

## Related Questions

(a) On March 2, Sage Hill Company sold \$891,900 of merchandise to Oriole Company on account, terms 3/10, n/30. The cost of the merchandise sold was \$527,400. (b) On March 6, Oriole Company return \$114,400 of the merchandise purchased on March 2. The cost of the merchandise returned was \$64,100. (c) On March 12, Sage Hill Company received the balance due from Oriole Company.

See explanation section.

Explanation:

Sage Hill Company

Journal entries

Requirement A.

March 2 Account receivable - Oriole Company    debit  \$891,900

Sales revenue                                         credit   \$891,900

Note: Assume that the company used gross method under a perpetual inventory system, during the sales, the company did not deduct the discount.

Cost of good sold            Debit  \$527,400

Merchandise inventory   Credit  \$527,400

Note: Under the perpetual inventory system, a seller has to record cost of good sold journal.

Requirement B & C.

B.

March 6 Sales Returns and Allowances Debit    \$114,400

Account Receivable                   Credit   \$114,400

Note: As the company did not calculate the cost of return goods, we did not give the cost of merchandise journal.

C.

March 12 Cash                            Debit     \$891,900

Sales Discounts          Debit     \$26,757

Account Receivable   Credit    \$891,900

Note: Calculation: (891,900-(891,900 × 3%) = (891,900 - 26,757) = \$865,143.

As the company received the amount with in the discount period, the customer got the discount from the seller.

Tom Cruise Lines Inc. issued bonds five years ago at \$1,000 per bond. These bonds had a 20-year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 4 %
Total return 13 %
Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity. Use Appendix B and Appendix D.

Explanation:

According to the question:

=

=

K = N

⇒  Bond Price =

K = 15

On putting the values, we get

⇒  Bond Price =

=

Imagine you are reviewing a business plan. In which section of the business plan would you expect to find the answers to the following questions?Question Financial Statements Marketing & Sales Management Service or Product Line
How much money will the owners invest in the business start-up?
How will the salespeople for this business be compensated?
What are the unique features of this business’s merchandise?

Hence,

The money which the owners invest in the business start-up is by Financial statements.

The salespeople for this business be compensated is by Marketing & sales management.

The unique features of this business’s merchandise are by Service or product line.

Explanation:

Financial statements show how much money will the owners invest in the business start-up.

Marketing & sales management shows how will the salespeople for this business be compensated.

Service or product line shows What are the unique features of this business’s merchandise

In a business plan, the 'Financial Statements' section provides information about the owner's start-up investment, compensation of salespeople is detailed in the 'Marketing & Sales Management' section, and unique merchandise features could be found in the 'Service or Product Line' section.

In a business plan, you would typically find the answers to your questions in the following sections:

• The amount of money that the owners will invest in the business start-up would typically be found in the Financial Statements section. This part of the business plan provides a detailed view of the business’s financial forecasts, including equity investment from owners.
• Information about how salespeople for the business will be compensated can be found in the Marketing & Sales Management section. This usually outlines the business's sales strategies, including employee compensation models.
• The unique features of a business's merchandise would be detailed in the Service or Product Line section. This illustrates what the business plans to sell, highlighting unique selling points and differentiators that make its products or services unique.

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Snap On Inc has a beta of 2.67 and the expected market return is 0.19. In addition, Treasury bills (risk-free asset) are currently yielding 0.02. Find the expected return for Snap On Inc.

Explanation:

Using the CAPM, The Capital Asset Pricing Model formulae , we have that

Expected Return = Risk Free Rate + Beta(Market Return - Risk Free Rate)

Where

market return is 0.19

Beta =2.67

risk-free asset= 0.02

Expected Return=0.02 +2.67 X (0.19 - 0.02)

=0.02 +2.67 X (0.17)

0.02 +0.4539

Required Return=0.47

Therefore Expected Return  for Snap On Inc is 0.47

Making an intentional omission of material fact when recommending a security to a ustomer would be considered fradulent if:__________.

A reasonable man would attach decision making important to the omitted information.

lauren is 17 years old. She report earned income of \$3,000 and unearned income of \$6,200. Is it likely that she is subject to the kidie tax? Explain.