The basic distinction between these two groups rested in the way that benefits were calculated. Benefits received from a defined contribution plan were a function of the investment success of the plan. Benefits from a defined benefit plan were fixed according to some formula. With defined benefit plans, post-retirement benefits were based on a predetermined formula. Usually, this formula was a function of years of service and salary.
Assessment A: Understanding Taxable Income and Taxes Owed Meaning of taxable income and taxes owed Taxable income is the amount you must pay on once all deductions are adjusted from your gross income. The amount of taxes you must pay on according to the tax laws. Taxes owed are the amount you must pay depending on any deductions that you may have. Someone will owe a different amount of taxes depending on if they paid for child care, attended school full time, cared for an elder, owns a home, made donations or any other deductions. Assessment B: Understanding Ways to Save on Federal Taxes Some ways to save money on your federal income tax Some ways to save on your federal income tax is to get a house because you can deduct the interest you paid on your mortgage or home equity loan.
When there is a transfer in a lease, all benefits along with risk are transferred to the lessee and will be capitalized by the lessee as well. b. How should Lani account for this lease at its inception and determine the amount to be recorded? Lani should account for the lease from the beginning as an asset and the obligation to equal the current value towards the beginning of the term at minimum payment during the term. When the amount goes over the fair value of the lease the amount should be documented as an asset.
Once the predicted demand is frozen, L.L. Bean uses its historical demand and forecast data to analyze the forecasting errors. The forecast errors are calculated for each individual item and a frequency distribution of these is made, which is further used as a probability distribution for future errors. Thus, if 50% of the errors were within 0.7 and 1.6, the forecast for this year would be adjusted accordingly. Next, each item commitment quantity was calculated using its contribution margin and its total contribution in dollar to the revenue of the company.
MULTIPLE CHOICE QUESTIONS 1. The statement of cash flows should help investors and creditors assess each of the following except the a. entity's ability to generate future income. b. entity's ability to pay dividends. c. reasons for the difference between net income and net cash provided by operating activities. d. cash investing and financing transactions during the period.
Answers to End-of-Chapter Questions 8-1 The opportunity cost is the rate of interest one could earn on an alternative investment with a risk equal to the risk of the investment in question. This is the value of I in the TVM equations, and it is shown on the top of a time line, between the first and second tick marks. It is not a single rate—the opportunity cost rate varies depending on the riskiness and maturity of an investment, and it also varies from year to year depending on inflationary expectations (see Chapter 6). 8-2 True. The second series is an uneven cash flow stream, but it contains an annuity of $400 for 8 years.
Under absorption costing, a portion of fixed manufacturing overhead is allocated to each unit of product. Variance analysis A variance analysis details and evaluates the difference between planned and actual results. A variance analysis is used to provide a comparison of budgeted costs with the actual costs or a comparison of the
Thus, if we assume that price and AVC are constant, (1) can be rewritten as follows P.QBE = TFC + AVC.QBE which yields: (1) Q BE = TFC P − AVC (2) K The difference “P ! AVC” is often called the average contribution margin1 (ACM) because it represents the portion of selling price that "contributes" to paying the fixed costs. ! Formula (2) can be generalized to deal with the situation where the firm has determined in advance a target profit. The output quantity Q* that will yield this profit is implicitly given 1 The total contribution margin is simply (P !
Budget definition: Budgets are financial plans looking at expected costs and revenues over a future period. Budget definition: Budgets are financial plans looking at expected costs and revenues over a future period. Profit: the amount of money a business has made over a certain time period. Profit= Total revenue-Total costs. Profit: the amount of money a business has made over a certain time period.
In order to properly evaluate performance, a flexible budget is utilized since it evaluates the “actual volume of activity, not the planned volume of activity” (Edmonds, p. 1061, 2007). Flexible budgets are use to evaluate the volume of activity based on different levels of volume, and they flex (or change) when the volume of activity changes (Edmonds, p. 1061, 2007). Flexible Budget Lend to CVP Analysis A cost-volume-profit (CVP) analysis, analyzes the changes in cost and volume by using a company’s income statement with the contribution margin format (Edmonds, p. 932, 2007). “The contribution margin is the difference between sales revenue and variable costs” (Edmonds, 2007, p. 932). A company’s profits are adversely affected by changes in sales price, costs, and the volume of activity (Edmonds, p. 946, 2007).