Answer:
A. If the Fed wants to reduce unemployment, it must be willing to accept more inflation.
B. If the Fed wants to reduce inflation, it must be willing to accept higher unemployment.
Explanation:
Stagflation is a situation in which there is a shift of the supply curve to the left that results in a high inflation due to which there is a high unemployement. Now if the fed wants to reduce the inflation so the demand would decline due to which the unemployment rises
Therefore A and B are correct
And C and D are incorrect
Answer:
The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Explanation:
. A three-year interest rate swap has a level notional amount of 300,000. Each settlement period is one year and the variable rate is the one-year spot interest rate at the beginning of the settlement period. The swap rate for this interest rate swap is 4.317%. Two years have elapsed and the one-year spot interest rate at the start of year three is 5.25%. Calculate the market value of the swap from the perspective of the payer.
Answer:
$2,660
Explanation:
The market value is the present value of expected future cash flows.
Expectation is that swap will pay (300,000) (0.04317) and receive (300,000) ( 0.0525), and these payments would be made at end of one year.
Then, market value = ((300,000)(0.0525) - (300,000)( 0.04317)) / (1 + 0.0525)
Market value = 2799 / 1.0525
Market value = 2659.38
market value = $2,660
Therefore, the market value of the swap from the perspective of the payer is $2,660.
Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $193,872, net annual cash flows $44,200, and present value factor of cash inflows for 10 years 4.66 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).) Determine the net present value, and indicate whether the investment should be made.
Answer:
NPV = $12,100
the project should be carried out
Explanation:
initial outlay = -$193,872
net cash flows years 1 - 10 = $44,200
present value of net cash flows = $44,200 x 4.66 = $205,972
net present value (NPV) = initial outlay + present value of cash flows = -$193,872 + $205,972 = $12,100
this investment should be carried out since its NPV is positive, therefore, it increases the company's wealth.
True or False: A market with several firms in operation can be a competitive, contestable market. True False The contestable market model has important policy implications. If there is concern that a market is not sufficiently competitive, what can policymakers do to increase competition in a given industry? Check all that apply. Decrease entry barriers Increase entry barriers Decrease the amount of regulation
Answer:
1. True
2. Decrease entry barriers
Decrease the amount of regulation
Explanation:
A market with several firms in operation can be a competitive market as the firms involved will compete against each other for the economic profits in the industry. The market has to have low barriers to entry for it to be contestable.
To make the industry more competitive, barriers to entry should be reduced and regulation relaxed. This will bring in more firms into this market and make it more competitive.
Oriole Company issued $476,000 of 10-year bonds at a discount. Prior to maturity, when the carrying value of the bonds was $454,580, the company redeemed the bonds at 97. Prepare the entry to record the redemption of the bonds.
Answer:
Date Account and Explanation Debit Credit
Bonds payable $476,000
Loss on bond redemption $7,140
(461,720 - 454,580)
Cash $461,720
(476,000 * 0.97)
Discount on bonds payable $21,420
(476,000 - 454,580)
(To record redemption of the bonds)
If on November 26,2017, The Dow Jones industrial average closed at 12,743.40, which was down 237.44 that day. what was the return (in percent) of stock market that day?
Answer:
-1.83%
Explanation:
The closing price was 12,743.40, which was down by .
it means that the opening price was
$12,743.40 + $237.44 = $12,980.44.
The percentage return will be the
return/ original price x 100
=- - 237.44/12,980.44 x 100
= - 0.018291574 x 100
= - 1.83%
For the competitive firm in the labor market, the value of the marginal product is equal to the marginal revenue product because marginal
Answer:
physical product of labor equals the wage rate
Explanation:
The marginal product of an input refers to the extra output produced as a result of addition of one unit of the input to the given productive factors.
Marginal revenue is the revenue earned by producing one more unit of a product.
For the competitive firm in the labor market, the value of the marginal product is equal to the marginal revenue product because marginal physical product of labor equals the wage rate.
Which of the following statements is NOT correct on service A. Services are time sensitive and cannot be stored or inventoried for future use. B. Services are acts or deeds that can be touched. C. A service system includes the service delivery process and all of the different elements of the organization required to support it. D. More people now work in the service section than in the agriculture section worldwide.
Answer:
B. Services are acts or deeds that can be touched.
Explanation:
A service can be defined as a collection of intangible goods that are being offered by a service provider to the end user in order to meet their needs or requirements.
Some of the characteristics and features of a service includes;
1. Services are time sensitive and cannot be stored or inventoried for future use.
2. A service system includes the service delivery process and all of the different elements of the organization required to support it.
3. More people now work in the service section than in the agriculture section worldwide
Hence, the statement which is not correct about service is that, services are acts or deeds that can be touched.
Nesrin purchased a $325,000 house and paid 25 percent down. She got a 30-year fixed-rate mortgage with an annual interest rate of 5.75 percent. After five years she refinanced the mortgage for 25 years at a 5.35 percent annual interest rate. After she refinanced, what is the new monthly payment (to the nearest dollar)
Answer:
$1,335.01
Explanation:
First step
PV = -325000 * (1-25%) = -243750
N = 30*12 = 360
I/Y = 5.75%/12
FV = 0
Using the Financial calculator
CPT PMT = PMT (-PV, N, I/Y, FV)
CPT PMT = $1,422.46
Second Step
PMT = 1422.46
PV = -325000*(1-25%) = -243,750
I/Y=5.75%/12
N = 12*5 = 60
Using the Financial calculator
CPT FV = FV(PMT, -PV, I/Y, N)
CPT FV = $226,107.75
The Loan outstanding is $226,107.75 after 5 years
Third Step
PV = -226107.75
I/Y = 5.1%/12
N = 12*25 = 300
FV = 0
Using the Financial calculator
CPT PMT = PMT(-PV, N, I/Y, FV)
CPT PMT = $1,335.01
Hence, the new monthly payment is $1,335.01
Assets Liabilities
Total Reserves $60,000
Demand Deposits $200,000
Loans $140,000
The balance sheet above shows the financial situation for the Car central bank has set a reserve requirement of 10 percent. What is additional money Carland National Bank can create?
a. $600,000.
b. $40,000.
c. $200,000.
d. $60,000.
e. $400,000.
Answer:
b. $40,000
Explanation:
Calculation for What additional money Carland National Bank can create
Using this formula
Additional money=Total Reserves-(Demand Deposits*Reserve requirement percentage)
Let plug in the formula
Additional money = $60,000 -( $200,000*10%)
Additional money = $60,000-$20,000
Additional money = $40,000
Therefore the additional money Carland National Bank can create will be $40,000
Clover Corporation uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine hours. The following data pertain to one month's operations:
Standard machine hours allowed for actual production: 3,550 MH
Actual machine hours for the month: 4,000 MH
Actual variable manufacturing overhead costs incurred: $ 80,000
Variable overhead spending variance: $ 5,450 Unfavorable
What is variable overhead rate variance?
A. S 9,450.00 unfavorable
B. S9,450.00 favorable
C. 4,000.00 unfavorable
D. 4,000.00 favorable
E. Not determinable
Answer:
D. 4,000.00 favorable
Explanation:
The formula for variable overhead spending variance provided below gives a clue on deriving the correct option.
variable overhead spending variance=actual variable spending overhead-budgeted variable spending overhead.
$5450=$ 80,000-budgeted variable spending overhead
budgeted variable spending overhead=$80,000-$5450=$74550
standard overhead rate=budgeted variable spending overhead/Standard machine hours allowed for actual production
standard overhead rate=$74550 /3550=$21
variable overhead rate variance=( standard rate* Actual machine hrs)-(actual rate*Actual machine hrs)
actual rate=Actual variable manufacturing overhead costs incurred/Actual machine hours for the month=$80,000/4000=$20
variable overhead rate variance=($21*4000)-($20*4000)=$4000(favorable since actual is lower than standard,hence, cost savings)
The Intramural Sports Club reports sales revenue of $578,000. Inventory at both the beginning and end of the year totals $110,000. The inventory turnover ratio for the year is 3.9.
What amount of gross profit does the company report in its income statement?
Answer:
$363,500
Explanation:
Gross profit = Revenue - Cost of Goods Sold.
In the case
Revenue = $578,000.
The Cost of Goods Sold: COGS
Inventory turn over = COGS/ Average turnover
Average turnover = Opening stock + closing stock/2
In this case Opening stock + Closing stock = $110,000
Average turnover = $110,000 /2 =$55,000
Therefore:
3.9 = COGS/$55,000
COGS = $55,000 x 3.9
COGS =$214,500
Gross profit = $578,000 - $214,500
Gross profit = $363,500
Im Doing A resume and they Need A real legit credit Card Number and Cvc ANd when it expires For My resume It's worth 100% of my grade Plz helps
Answer:
alex do u realize ur question is litterally against the law
Explanation:
quit being a j erk, and lets talk this out
Greta starts using a new baking technique and she can now do twice as much of everything—in a single day Greta can now make 10 cakes or 8 pies, rather than the 5 cakes and 4 pies she could previously bake. We now know that Greta's production possibility frontier:
a. has shifted right, but her opportunity costs of making pies are unchanged.
b. has shifted right, but her opportunity costs of making pies have decreased.
c. has not changed, but her opportunity costs of making pies have increased.
d. has not changed, but her opportunity costs of making pies have decreased.
Answer:
a. has shifted right, but her opportunity costs of making pies are unchanged.
Explanation:
As we know that Greta curve should be shifted to righward as she can generated more and more units for both the goods so here the c and d option would be remooved. The option A and optoin B are considering the opportunity cost so here we can see that
10 ÷8 = 5 ÷ 4
5 ÷ 4 = 5 ÷ 4
As it can been seen that the opportunity cost remains the same
Therefore the option A is selected
Sally Clark purchased 500 shares of ABC corporation for $10 per share and oaid a total commission of $200. The current price of the stock is $12 per share. Last year, Sally received dividends of $2 per share
Answer:
38.46%
The question
Based on the information given, compute stock returns.
Explanation:
The percentage return will be
The actual returns/ amount invested x 100
Returns represent gains from the share.
1. The gain in share price
= Current value - original value
=($12 x 500 ) - ($10 x 500)
=$6,000 - $5,000
=$1,000
2. gain from dividends
=$2 x 500
=$1,000
Total gain = $1000 + 1000 = $2000
The amount invested = original value + commissions
=($10 x 500) + $200
=$5200
The percentage gain
= $2000/5200 x 100
=0.384615 x 100
=38.46%
Watunga County Bank agrees to lend Vaughn Granite Company $599000 on January 1. Vaughn Granite Company signs a $599000, 8%, 9-month note. The entry made by Vaughn Granite on January 1 to record the proceeds and issuance of the note is
Cash 599000
Interest Expense 35940
Notes Payable 599000
Interest Payable 35940
Interest Expense 35940
Cash 563060
Notes Payable 599000
Cash 599000
Notes Payable 599000
Cash 599000
Interest Expense 35940
Notes Payable 634940
What is the adjusting entry requited if Hoffman Granite Company prepares financial statements on June 30th?
Answer:
DR Cash $599,000
CR Notes Payable $599,000
Explanation:
As this is the entry for the issuance of the note, interest will not be recorded as it is incurred as during the loan period.
Entry will be;
Date Details Debit Credit
Jan 1 Cash 599,000
Notes Payable 599,000
You are trying to estimate the value of the XYZ Inc. company, as of the end of 2019. The after-tax cashflow from assets (FCFF) for the year ending 2019 is $126 million. The estimated WACC is 11%. What comes closest to the current value of the firm XYZ if the expected after-tax cashflows to assets for the next two years are expected to grow at 15% and then grow at a lower rate of 2% thereafter forever?
Answer:
$ 1,798.56
Explanation:
The current value of the firm is the discounted after-tax cashflow from assets as well as the terminal after-tax cashflows as shown below:
2020 FCFF=$126 million*(1+15%)=$144.90 million
2021 FCFF=$126 million*(1+15%)^2=$166.64 million
Terminal value=2021 FCFF*(1+g)/(WACC-g)
g=terminal growth rate of FCFF=2%
WACC=11%
Terminal value=$166.64 million*(1+2%)/(11%-2%)=$ 1,888.53 million
current value of firm=$144.90 million/(1+11%)^1+$166.64 million/(1+11%)^2+$ 1,888.53 million/(1+11%)^2
current value of firm=$ 1,798.56
Which factor would credit card companies most likely use to determine an
applicant's creditworthiness?
A. Hourly wages
B. Languages spoken
C. Political party
D. Size of family
A factor that credit card companies would most likely use to determine an applicant's creditworthiness is Hourly wages.
Credit card issue
When you apply for a credit card, you’re required to share an array of personal information on your application. This will include details like your name, address, Social Security number and current employment status. You’ll also be asked to list your income on your application, although the type of income card issuers ask for can vary depending on the card issuer.
Determination of hourly wages
Not all credit card issuers will ask for your annual net income. Some may explicitly ask for your gross income. If you are paid an hourly wage, on the other hand, you may need to figure out your gross income using last year’s tax return or by multiplying your gross weekly income by the number of weeks you work within a year.
Thus, A factor that credit card companies would most likely use to determine an applicant's creditworthiness is Hourly wages.
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The following unadjusted trial balance contains the accounts and balances of Dylan Delivery Company as of December 31, 2017
a. Unrecorded depreciation on the trucks at the end of the year is $8.231
b. The total amount of accrued interest expense at year-end is $8,000.
c. The cost of unused office supplies still available at year-end is $1,400.
1. Prepare the year-end closing entries for Dylan Delivery Company as of December 31, 2017
2. Determine the capital amount to be reported on the December 31, 2017 balance sheet.
Answer:
Question 1
Part a
Debit : Depreciation $8.231
Credit : Accumulated Depreciation $8.231
Part b
Debit : Interest Expense $8,000
Credit : Long term notes payable $8,000
Part c
Debit : Office Supplies Expenses $ 500
Credit: Office Supplies $ 500
Question 2
Capital amount to be reported on the December 31, 2017 balance sheet is $170,551
Explanation:
See below the full question that i have attached
Calculation of Capital amount as at December 31, 2017
Balance before adjustments $187,282
Adjustments :
Depreciation ($8.231)
Interest Expense ($8,000)
Office Supplies Expenses ($ 500)
Balance after adjustments $170,551
Clear OKRs presented by MyFitnessPal enabled other divisions of Under Armour to align themselves with what MyFitnessPal was capable of and the momentum it had. MyFitnessPal was also able to use the OKR system to align with other divisions of Under Armour.
a) true
b) false
Answer:
a) true
Explanation:
OKRs means “Objectives and Key Results.” It is an organizational collaborative and goal-setting technique used by individuals, teams, and divisions to set challenging, ambitious, and attainable goals with measurable results. OKRs are used to track progress, create alignment, and encourage engagement around measurable goals. As a goal-setting framework for defining and tracking objectives and their outcomes, OKRs are different from Key Performance Indicators (KPIs), which measure performance within a strategic framework.
The government is supposed to look out for the consumer when a new product or service is introduced to the market. This role of government is that of _____.
one that reallocates income
a source of public good
a supervisory body
an entrepreneurship
Answer:
the correct answer is "a supervisor body" have a great day. also can I get brainliest?
The government is supposed to look out for the consumer when a new product or service is introduced to the market. This role of government is that of a supervisory body. Option (c) is correct.
What is a supervisory body?Supervisory body a designated or authorized group charged with administering the organization's regular business operations, special projects, or other duties.
Government oversight, or control, takes the form of decisions made by the administration, the legislative, and even the court. Government oversight has an impact on a company through its facilities and oversight of an organization's management, accounting, and entrepreneurial operations.
The four roles of management, development, mediation, and support are all included in supervision.
Therefore, Option (c) is correct.
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The tables show the annual incomes for the citizens in two countries, Melka and Sorare. Use this information to answer the questions. The Nation of Sorare Citizen Income Teddy $2,000 Kermit $50,000 Franklin $63,500 Anna $1,500 Eleanor $2,000 Edith $1,000 The Nation of Melka Citizen Income Etta $20,000 Duke $21,000 Louis $20,000 Billie $20,300 Cole $19,000 Zora $19,700 Based on the information here, which nation would you expect to have the higher Gini coefficient
Answer: The nation of Sorare
Explanation:
The Gini coefficient is a statistical measure that is used to measure income disparity/ inequality in a country.
The closer to zero the Gini coefficient is, the more equitable the income in a country is. Simply put, if more people in a nation have similar levels of income, the Gini coefficient will be smaller.
In the question, the nation of Sorare has two people earning a high amount of money while others make considerably less. This shows a high income disparity which means that the Gini coefficient here will be higher than in Melka where citizens mostly have similar incomes.
Youngstown Rubber reports the following data for its first year of operation. Direct materials used $710,200 Direct Labor 350,000 Cost of goods manufactured 1,030,300 Finished goods inventory, ending 190,900 Finished goods inventory, beginning 0 Manufacturing overhead 100,100 Work in process inventory, beginning 0 Work in process inventory, ending 130,000 What are the total manufacturing costs to account for
Answer:
$1,160,300
Explanation:
Total Manufacturing Costs are all costs related to the production of goods to be sold. This consists of direct costs such as labor and material and other indirect costs such as electricity and rentals.
Calculation of total manufacturing costs :
Cost of goods manufactured 1,030,300
Add Closing Work In Process 130,000
Less Beginning Work In Process 0
Total manufacturing costs $1,160,300
Executive Chalk is financed solely by common stock and has 25 million shares outstanding with a market price of $10 a share. It announces that it intends to issue $160 million of debt and use the proceeds to buy back common stock. Assume that the MM assumptions hold (i.e., no taxes, no costs of financial distress). a) What is the value of the firm before and after the proposed capital structure change
Answer: See explanation
Explanation:
First we will have to calculate the value of the firm before the debt issue. This will be:
= 25,000,000 × $10
= $250,000,000
We also calculate the value of the firm after after the proposed capital structure change. The value of equity will be:
= $250,000,000 - $160,000,000
= $90,000,000
Therefore, the value of debt will also be $160,000,000.
Sally opened her own business and resigned from a job paying $25,000 per year. Her savings acccount pays 8% interest, but she withdrew $20,000 to buy some machinery which didn't fall in value. She could have earned 10% on the $20,000 had she invested it in another company with the same risk as hers. In adddition to the $20,000 her only other cost is $15,000 per year she charges her business as a salary for herself. In the first year her business made accounting profit of $12,000. Will other people having $20,000 in savings want to leave a $25,000 job to open a business like Sally's if their only objective is money?
A) They would be indifferent, as Sally's income net of costs equals $25,000.
B) Yes, because Sally's income is $27,000 but her costs are $20,000.
C) No, because Sally's income is $27,000 but her costs are $35,000.
D) Yes, because Sally's economic profit is positive.
E) Both (B) and (D).
Answer:
A) They would be indifferent, as Sally's income net of costs equals $25,000.
Explanation:
Sally's economic profit = accounting profit - opportunity costs
accounting profit = $12,000opportunity costs = $25,000 - $15,000 in lost salaries + $2,000 (lost investment revenue) = $12,000economic profit = $12,000 - $12,000 = $0
Since the economic profit is $0, Sally should be indifferent between running her own business or working for someone else.
Barbara's employer offers health coverage to its employees. However, Barbara feels it is unaffordable and wants to apply for a health insurance premium tax credit. In order for the coverage to be deemed unaffordable in 2020, Barbara's self-only premium must exceed __ of her household income.
Answer:
9.83%
Explanation:
If the health insurance premium represents 9.83% of Barbara's income or less, it is considered affordable coverage. Only if it exceeds the 9.83% threshold, will Barbara be able to request a health insurance premium tax credit. Theoretically, if Barbara's health insurance was purchased in the Health Insurance Marketplace, the tax credit should be automatic and her premium should be lowered so that it can become affordable.
A bank's actual reserve ratio is the percentage of total deposits a bank actually holds on to. It is made up of the percentage they are required to hold on to, known as the required reserve ratio, plus any extra they choose to hold on to. Suppose Dave's bank has an actual reserve ratio of 12%, and his bank makes a loan to Darlene based on the funds from Dave's deposit. How much does the money supply increase as a result of this second step
Answer:
The increase in the money supply will be "833333.33".
Explanation:
The real reserve ratio of either a lender seems to be the proportion of overall reserves another bank currently occupies onto another. It consists of the proportion they become required to secure forward with, referred to that as the reserve requirement expected, including whatever extra those who happen to retain onto this.According to the question,
The multiplier will be:
⇒ [tex]\frac{1}{RRR}[/tex]
⇒ [tex]\frac{100}{12}[/tex]
⇒ [tex]\frac{25}{3}[/tex]
So the increase will be:
⇒ [tex]100000\times \frac{25}{3}[/tex]
⇒ [tex]833333.33[/tex]
Tax rate 35% 2020 2019 Revenues $42,629 $37,911 Cost of goods sold 23,704 24,832 Interest 1,230 1,584 Dividends 1,200 600 Depreciation 2,609 2,814 Administrative expenses 7,040 6,820 Cash 3,671 2,969 Inventory 3,968 4,503 Accounts payable 2,325 3,760 Long-term debt 19,105 25,900 Accounts receivable 4,601 5,318 Common stock 22,600 19,800 Net fixed assets 41,260 42,110 (2) What is the Net Debt to Operating Cash Flow Ratio in 2020
Answer:
The Net Debt to Operating Cash Flow Ratio in 2020 is:
2.26
Explanation:
a) Data and Calculations:
Tax rate 35%
2020 2019
Revenues $42,629 $37,911
Cost of goods sold 23,704 24,832
Interest 1,230 1,584
Dividends 1,200 600
Depreciation 2,609 2,814
Administrative expenses 7,040 6,820
Cash 3,671 2,969
Inventory 3,968 4,503
Accounts payable 2,325 3,760
Long-term debt 19,105 25,900
Accounts receivable 4,601 5,318
Common stock 22,600 19,800
Net fixed assets 41,260 42,110
Cash Flow from operations:
2020 2019
Revenues $42,629 $37,911
Cost of goods sold 23,704 24,832
Interest 1,230 1,584
Administrative expenses 7,040 6,820
Net cash flow $10,655
Working capital adjustment:
Inventory 535 (-3,968 + 4,503)
Accounts payable (1,435) (-2,325 + 3,760)
Accounts receivable 717 (-4,601 + 5,318)
Net cash from operations $10,472
Total debt:
Long-term debt = $19,105
Current debt = 4,601
Total debt = $23,706
Cash flow-to-debt ratio = Total debt/Net cash from operations
= $23,706/$10,472
= 2.26
b) The cash flow-to-debt ratio is the ratio of a company's cash flow from operations to its total debt, which shows how long (2.26 years) it takes the company to repay its debt if it devoted all of its cash flow to debt repayment.
Your client has called for help with their bank feeds in QuickBooks Online. You begin by asking them to open the Banking tab in the Left Navigation bar and your client tells you that she doesn't see this option listed. What could be the reason?a. Your client doesn't have bank feeds enabledb. Your client has Business view selected in their settingsc. Your client has turned off the Banking option in their settingsd. Your client has the Simple Start subscription for QuickBooks Online
Answer: b. Your client has Business view selected in their settings
Explanation:
There are two views when it comes to Quickbooks Online: Business view and Accountant view. Accounting view is for more seasoned users who have some form of accounting training so it has more features.
Business view on the other hand is simplified for those who don't know much about accounting. It is easy to follow and some features are reordered for simplicity.
The Banking tab is one of those features and it is not openly shown in the business view so the most probably the reason your client can't see it is that she is using the Business view.
Which of the following decisions is part of the HR function of compensation?
A. What responsibilities should be part of an office worker's job
B. How to make sure office workers are treated ethically
C. Which employees will do the best work in the fastest time
D. Whether to pay office workers a wage or a salary
Answer:
D. Whether to pay office workers a wage or a salary
Explanation:
Compensation is paying employees for the services rendered. It is a function of the human resources department. Compensation may be in monetary or non-monetary form.
Ensuring fair and timely compensation to workers is a critical function of the human resources managers. The HR evaluates roles and responsibilities periodically to ensure it has a fair compensation scheme. HR has to determine whether employees will work part-time or full-time, whether to employ permanently or by contract or pay salaries or wages.
Mighty Safe Fire Alarm is currently buying 60,000 motherboards from MotherBoard, Inc., at a price of $65 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $28 per unit; direct labor, $8 per unit; and variable factory overhead, $17 per unit. Fixed costs for the plant would increase by $76,000. Which option should be selected and why
Answer:
It is cheaper to make the units in-house.
Explanation:
Giving the following information:
Buy:
Purchase price= $65
Make:
Direct materials= $28 per unit
Direct labor= $8 per unit
Variable factory overhead= $17 per unit.
Fixed costs for the plant would increase by $76,000.
We need to calculate the total cost for each option. The best option is the one with lower total costs:
Buy:
Total cost= 60,000*65= $3,900,000
Make:
Total cost= 60,000*(28 + 8 + 17) + 76,000
Total cost= 3,180,000 + 76,000
Total cost= $3,256,000
It is cheaper to make the units in-house.