Dave's Mirror Company expects to sell $1,000,000 worth of mirrors and to produce $1,250,000 worth of mirrors in the coming year.The company purchases $300,000 of new equipment during the year.Sales for the year turn out to be $1,100,000.Actual investment by Dave's Mirror Company equals ________ and planned investment equals _______.

Question

Quizplus · Accepted Answer

Actual investment by Dave's Mirror Company includes the purchase of $300,000 worth of new equipment, so the actual investment is $300,000. The planned investment includes the expected sales of $1,000,000 and the production of $1,250,000, for a total of $2,250,000. However, since sales turned out to be only $1,100,000, the planned investment is reduced by $150,000 (the difference between the expected and actual sales), giving a total planned investment of $2,100,000. Subtracting the actual investment of $300,000 from the planned investment of $2,100,000 gives a planned investment of $1,800,000, which is $550,000 more than the actual investment. Therefore, the answer is D, $450,000 for actual investment and $550,000 for planned investment.

Dave's Mirror Company Expects to Sell $1,000,000 Worth of Mirrors