Answer:
false
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Monetary amounts should be allocated to intangible benefits and incorporated into the calculation of NPV
Performance management:______________.a. Requires the courage to have difficult conversationsb. Cannot be accomplished well without good informationc. Means providing concrete exemplars to calibrate subjective perceptionsd. Should require collecting information from different sources and perspectivese. All of the above
Answer:
e. All of the above
Explanation:
Performance management is an activity that is done by management in the entire company. The entire process starts from collecting good quality information about the set standards and the actual performance.
When the management chooses to have some difficult conversations that is about areas which are not considered to improve they tend to increase the scope of improvement in those areas also.
This entire process requires huge co-operation from the entire business unit, employees, workers, and entire staff.
The business should always be run as a team task. Further the management shall describe the entire work to each team properly. And broader the information areas, more advanced performance will be regulated and better scope of improvement will be observed.
Thus, all the stated statements are true and correct about performance management.
How do financial managers tend to value all assets in the same terms?a. By evaluating cash flowsb. By qualifying cash flowsc. By interpreting cash flowsd. By estimating cash flows
Answer:
a. By evaluating cash flows.
Explanation:
In Economics, an asset can be defined as any resources of economic value or items of monetary value that is being owned by an individual, country or business organization to generate income and derive benefits from.
Generally, assets can be classified broadly into four (4) categories and these are; capital assets, fixed assets, intangible assets, and financial assets.
Financial managers tend to value all assets in the same terms by evaluating cash flows.
Cash flow can be defined as the net amount of cash and cash-equivalents that is flowing into (received) and out (given) of a business. There are three (3) main components of the cash flow; investing, operating and financing.
What are some goals of NYFEA? Check all that apply. encouraging political involvement educating children developing agricultural leaders encouraging new and young farmers developing medical treatments encouraging small farms
Answer:Developing agriculture leaders
Encouraging new and younger farmers
Encouraging small farms
Explanation:
Answer:
3. Developing agricultural leaders
4. Encouraging new and young farmers
6. Encouraging small farms
Explanation:
Just took the assignment
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At the end of the current period, Maltese, Inc. reports the following amounts: Assets = $54,200; Liabilities = $26,300; Dividends = $2,700; Revenues = $18,500; Expenses = $13,400.
Calculate net income and stockholders' equity at the end of the period.
Answer:
Net income =$5,100
Shareholders equity=$27,900
Explanation:
Calculate net income and stockholders' equity at the end of the period.
Explanation:
Calculation for the net income and stockholders' equity at the end of the period
Calculation for NET INCOME using this formula
Net income=Revenues- Expenses
Let plug in the formula
Net income=$18,500-$13,400
Net income =$5,100
Therefore Net income amount will be $5,10
Calculation for SHAREHOLDER'S EQUITY using this formula
Shareholdersl's equity=Assets- Liabilities
Let plug in the formula
Shareholders equity=$54,200 -$26,300
Shareholders equity=$27,900
Therefore Shareholders equity will be $27,900
Salesforce case assignment rules are based on elapsed time.a) trueb) false
Answer:
b) false
Explanation:
Salesforce case assignment deals with a company's lead generation strategies which can either be based on manual operations or automatic processes. For example, Web to Case strategy, Email to Case technique, On-Demand Email to Case system approach, etc.
Consequently, Salesforce case assignment rules run instantly, oftentimes on case creation and are not time-based
Hence, the correct answer is FALSE
Which of the new four ps encompasses the old four ps as well as a range of other marketing activities that might not fit well into the old view of marketing?a) programs.b) processes.c) promotion.d) people.e) performance.
Answer: programs
Explanation:
Programs encompasses the old four ps as well as a range of other marketing activities that might not fit well into the old view of marketing.
It should be noted that a program has to do with the group of projects which are related and also managed in a manner which is coordinated in order to obtain benefits that are not available when one manages them individually.
Revenues generated by a new fad product are forecast as follows:Year Revenues1 $54,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $50,000 in plant and equipment.a. What is the initial investment in the product? Remember working capital.Initial investment $ b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 30%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. (Do not round intermediate calculations.)Year Cash Flow1 $ 2 3 4 c. If the opportunity cost of capital is 12%, what is the project's NPV? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)NPV $ d. What is project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)IRR %rev: 09_24_2015_QC_CS-26391, 02_03_2015_QC_C
Answer:
a. What is the initial investment in the product?
$55,400b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 30%, what are the project cash flows in each year?
NCF₁ = $25,050NCF₂ = $15,250NCF₃ = $11,750NCF₄ = $8,250c. If the opportunity cost of capital is 12%, what is the project's NPV?
-$7,270.28d. What is project IRR?
4.27%Explanation:
year cash flows costs working capital
0 -$50,000 -$5,400
1 $54,000 -$27,000 $3,000 (+$2,400)
2 $30,000 -$15,000 $2,000 ($1,000)
3 $20,000 -$10,000 $1,000 (+$1,000)
4 $10,000 -$5,000 $0 (+$1,000)
net cash flow year 1 = [($54,000 - $27,000 - $12,500) x 0.7] + $12,500 + $2,400 = $25,050
net cash flow year 2 = [($30,000 - $15,000 - $12,500) x 0.7] + $12,500 + $1,000 = $15,250
net cash flow year 3 = [($20,000 - $10,000 - $12,500) x 0.7] + $12,500 + $1,000 = $11,750
net cash flow year 4 = [($10,000 - $5,000 - $12,500) x 0.7] + $12,500 + $1,000 = $8,250
I calculated the NPV and IRR using a financial calculator
Question 1
1 pts
Having a global vision simply means having a willingness to sell outside
one's national borders if, and when, the opportunity arises.
True or
False
Answer:
False
Explanation:
Having a global vision I believe means that a management does recognize and very well reacts to international marketing opportunities. The management will be using different effective marketing strategies. The management is also very much aware of threats from their foreign competitors in all the different markets they are into.
Based on this short and concise explanation I just made, we can see that having a global vision does not mean having a willingness to sell outside one's national borders if, and when, the opportunity arises.
Suppose you bought a bond with an annual coupon of 7% one year ago for $1,010. The bond sells for $985 today. A. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?B. What was your total nominal rate of return on this investment over the past year? C. If the inflation rate last year was 3%, what was your total real rate of return on this investment?
Answer:
(a) $45
(b) 4.45%
(c) 1.4%
Explanation:
Mentioned that,
The Value of bond one year ago is $1,010
The Annual coupon rate is 7%
The Selling value of bond today is $985
The Face value is $1,000
Based on the above information, the calculations are shown below:
a. Total dollar return on this investment is
= Current bond price - previous year price + Coupon payment
= $985 - $1,010 + ($1,000 × 7%)
= $985 - $1,010 + $70
= $45
(b) The total Nominal rate of return on this investment is
= [(Current bond price - previous year price + Coupon payment) ÷ previous year price]
= [($985 - $1,010 + ($1,000 × 7%)) ÷ $1,010]
= $45 ÷ $1,010
= 0.0445
= 4.45%
(c) In case when Inflation rate last year is 3%
The Total real rate of return is
= [(1 + Nominal rate) ÷ (1 + Inflation rate)] - 1
= [(1 + 4.45%) ÷ (1 + 3%)] - 1
= 1.0140 - 1
= 0.0140
= 1.4%
What means can managers use to assess political risk? What do you think is the relative effectiveness of these different methods? At the time you are reading this, what countries or areas do you feel pose political risk sufficient to discourage you from doing business there?
Explanation:
Political business risks can negatively affect the profitability of a company or investment in a particular country or location, these risks are inherent in political crises that affect the economy of a location, so it is necessary for managers to assess political risk using analysis indices of risk, assessment systems, past results, country positioning and it is also essential that managers seek experts for better guidance on political risks.
Brazil, for example, is a country that despite attracting a lot of international investment through government incentives, is going through an internal political crisis that gives it greater instability and causes instability so that investors feel safe in investing in the country, due to the possibility of rapid change in the political scenario that can lead to negative economic changes and unforeseen events that mean negative risks for foreign investors.
Suppose Ruston Company had the following cash flow results for 2019: Net Cash Flow from Operating Activities of $9,100,000 Net Cash Flow from Investing Activities of -$4,300,000 Net Cash Flow from Financing Activities of $3,400,000 Create a statement of cash flows with amounts in thousands. What is the Net Cash Flow?
Answer:
Explanation:
Suppose Ruston Company had the following cash flow results for 2019: Net Cash Flow from Operating Activities of $9,100,000 Net Cash Flow from Investing Activities of -$4,300,000 Net Cash Flow from Financing Activities of $3,400,000 Create a statement of cash flows with amounts in thousands. What is the Net Cash Flow?
Philip Morris expects the sales for his clothing company to be $530,000 next year. Philip notes that net assets (Assets − Liabilities) will remain unchanged. His clothing firm will enjoy a 10 percent return on total sales. He will start the year with $130,000 in the bank.What will Philip's ending cash balance be?
Answer:
$183,000
Explanation:
Calculation for the ending cash balance
Opening cash balance $130,000
Add Profit $53,000
(10% Return on total sales× Sales amount of $530,000)
Ending cash balance $183,000
Therefore the ending cash balance will be the amounts of $183,000
On April 1, 2016, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:A. Opened a business bank account with a deposit of $24,000 from personal funds.B. Paid rent on office and equipment for the month, $3,600.C. Paid automobile expenses (including rental charge) for month, $1,350, and miscellaneous expenses, $600.D. Purchased office supplies on account, $1,200.E. Earned sales commissions, receiving cash, $19,800.F. Paid creditor on account, $750.G. Paid office salaries, $2,500.H. Withdrew cash for personal use, $3,500.I. Determined that the cost of supplies on hand was $300; therefore, the cost of supplies used was $900.Required:1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and will be cleared if entered.Assets = Liabilities + Owner’s EquityMaria Maria Accounts Adams, Adams, Sales Salaries Rent Auto Supplies MiscellaneousCash + Supplies = Payable + Capital - Drawing + Commissions - Expense - Expense - Expense - Expense - Expense2. Prepare an income statement for April, a statement of owner’s equity for April, and a balance sheet as of April 30. Refer to the list of Accounts on the accounting equation grid and the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss has been incurred, enter that amount as a negative number using a minus sign. You will not need to enter colons (:)
Answer:
The solution and the calculation is shown on the first , second , third and fourth uploaded image
Explanation:
Accounting has its own vocabulary and basic relationships. Match the accounting terms with the corresponding definition or meaning. ____ 1. Debit ____ 2. Expense____ 3. Net income____ 4. Ledger____ 5. Posting____ 6. Normal balance____ 7. Payable____ 8. Journal ____ 9. Receivable____ 10. Owners’ equitya. Always an asset b. Side of an account where increases are recorded c. Record of transactions d. The cost of operating a business; a decrease in stockholder’s equity e. Grouping of accounts f. Copying data from the journal to the ledger g. Revenues – Expenses h. Always a liability i. Left side of an account j. Assets – Liabilities
Answer and Explanation:
The matching of the accounting term with the definition is shown below:
1. Debit - it comes in the left side i.e. (i)
2. Expense: It decreases the stockholder equity also it contains the debit balance i.e. (d)
3. Net income: It is a statement that shows the expenses and revenue related transactions i.e. (g)
4. Ledger: It is the T-account in which the journal entries are posted i.e. (e)
5. Posting: The data is copied from journal to ledger we called as posting i.e. (f)
6. Normal balance: It is the side of an account in which the account increment is recorded i.e. (b)
7. Payable: It is a liability and it always a credit balance and shown in the balance sheet i.e (h)
8. Journal: In this the transactions are recorded i.e. (c)
9. Receivable: This is an asset and it has always a debit balance i.e. (a)
10. Owner equity: It is amount i.e. to be invested in the business also shows a difference between the total asset and total liabilities i.e. (j)
Refined grain products are often fortified with _____ to decrease rates of _____.a. iodine; early deliveryb. vitamin A; fetal heart abnormalitiesc. folic acid; early deliveryd. iron; neural tube defectse. folic acid; neural tube defects
Answer: folic acid; neural tube defects
Explanation:
Refined grain products are often fortified with folic acid to decrease rates of neural tube defects.
Refined grains products are the products that have been milled. This means that the bran and the germ has been removed to give the grains a finer texture and also to improve the shelf life of the grain. Examples of refined grain products are white rice, de-germed cornmeal, white flour, and white bread.
What is the value today of a money machine that will pay $4,010.00 per year for 13.00 years?
Answer:
The present value of the machine is $35499
Explanation:
The annual amount or annuity amount = $4010 per year.
Total number of years = 13 years
Here, the interest rate is not given so we just assume the interest rate = 6% per annum.
Since we have a total number of years and annual payment that occurs for 13 years. We are required to find the present value of the machine. So use the formula to find the present value of the annuity.
The present value of machine = (Annuity amount x (1 – (1+r)^-n) ) / r
The present value of machine = (4010(1 – (1+6%)^-13) ) / 6%
The present value of machine = $35499
For the past 10 years, Tony was an agent for It’s a Wonderful Life Insurance Company. While his career started out strong, Tony got involved in some transactions involving cash that violated his company’s ethical policies, and they terminated him as an agent last month, but did not notify Tony’s clients of his termination, and have not yet collected company forms and logos from Tony. Last week, Christopher, a long-time client of Tony’s, purchased a new It’s a Wonderful Life life insurance policy from Tony to cover the costs of his newborn child’s college education. The policy binder indicated that the insurance was in force as soon as Christopher signed the application and paid the premium (since Christopher was a long-time customer of Tony and the Insurance Company). Which of the following statements is correct?
A. The life insurance policy is not in force because Tony was no longer an agent of It’s a Wonderful Life Insurance Company.
B. The policy is in effect because Tony had the apparent authority to issue the policy.
C. The policy is in effect because Tony had the implied authority to issue the policy.
D. The policy is in effect because Tony had the express authority to issue the policy.
Answer:
C. The policy is in effect because Tony had the implied authority to issue the policy.
Explanation:
In the situation of Tony, it could be concluded safel that he has the implied authority due to the fact that, most of the company's forms and logos are still with him. And, also, none of the company's customers were notified about the termination of Tony's contract thereby invalidating him as being one of the staff of the company.
Which of these items is typical of business buying behavior?
Sam is skilled at making both necklaces and earrings. Sam has no preference between making necklaces or earrings since he earns the same amount from the two activities. If the selling price of earrings decreases from $40 to $20, then Sam's opportunity cost of making necklaces ______________ and making necklaces is now ______________ profitable than making earrings. Suppose that the necklaces market consists of several suppliers like Sam who are skilled at making both necklaces and earrings. Which of the following is likely to happen to the supply curve of necklaces when the price of a earrings decreases?
A. It does not change
B. It shifts to the left
C. It shifts to the right
Answer and Explanation:
Since in the question it is mentioned that Sam is skilled in both necklaces and earrings also he has no preference and the same amount is earned
In case when the selling price of earring reduced from $40 to $20 so the opportunity cost of necklace is decreased so automatically it would be more profitable
Also when the price is decreased so the supply curve would be shifted to the right
Core competencies in organizations generally relate to:_________.A) costB) qualityC) timeD) flexibilityE) all of the above
The core competencies of a company refers to the resources and capabilities embodied in the Internal structures which serves as strategic advantages of the organization as well.
In other word, the core competencies are set of skills and abilities that make organization different from others.
Example of core competencies includes Communication, Flexibility, Adaptability, Interpersonal skills, Leadership skills, Problem-solving skills etc
We can conclude that the core competencies generally relate to quality and flexibility of the staffs or employees.
In conclusion, the Option B and D is correct.
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In accounting for a contingent liability, if the likelihood of the obligation is probable but the amount cannot be estimated, a company must:_____.a. recognize the liability and report it on the balance sheet.
b. do nothing.
c. not recognize or disclose the liability until it is certain and the exact amount is known.
d. provide disclosure in the footnotes to the financial statements.
Answer: d. provide disclosure in the footnotes to the financial statements.
Explanation:
A contingent liability is an obligation that a company might owe in future depending on the outcome of an event such as a law suit.
To record a contingent liability in the books, two conditions must be satisfied;
Loss must be probableAmount must be estimableIf these two conditions are not satisfied then the contingent liability may simply be disclosed as a footnote in the financial statement. The amount here is not estimable so can be disclosed as a footnote.
During an unpredictable event, the coverage for the damage to a third person in which the insured party is liable is a contingent liability. Examples are goods warranties, lawsuits etc.
The correct answer is:
Option d. provide disclosure in the footnotes to the financial statements.
This can be explained as:
If during a trial or any event when the third party is insured then the owner business needs to remunerate the damage losses.For the contingent liability, the losses must be presumable and the damaged sum should be computable.If the above-stated circumstances are not satisfied then it is published in the footnote.Therefore, the amount is disclosed in the footnote.
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Pharoah Chemicals management identified the following cash flows as significant in its year-end meeting with analysts: During the year Pharoah had repaid existing debt of $315,900 and raised additional debt capital of $645,000. It also repurchased stock in the open market for a total of $44,820. What is the net cash provided by financing activities? (If an amount reduces the cash flow then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
Net cash provided by financing activities = $284,280
Explanation:
Net cash provided by financing activities = Additional debt - Repayment of existing debt - stock repurchase
Net cash provided by financing activities = $645,000 - $315,900 - $44,820
Net cash provided by financing activities = $284,280
Swifty Fabricators produces protective covers for smart phones. Since the covers must be customized to each smart phone model, Swifty uses a job order costing system. On September 1, the company reported the following inventory balances:
Direct Materials $31,500
Work in Process $152,000
Finished Goods $260,000
During September, the following events occurred:
1. Swifty purchased direct materials costing $3,708,000 on account.
2. Swifty used $432,000 in direct materials in production.
3. Swifty’s employees clocked 22,000 direct labor hours at an average wage rate of $13.23 per direct labor hour.
4. The company incurred $182,000 in manufacturing overhead, including $18,000 in indirect labor costs.
5. Using direct labor hours as the application base, the company applied $166,000 of manufacturing overhead to jobs worked on in September.
6. The company completed production on jobs costing $858,000.
7. The company delivered jobs costing $1,078,000 to customers.
1. Calculate the ending September balance of the Direct Materials, Work in Process, and Finished Goods Inventory accounts.
2. Calculate total manufacturing costs for September.
Answer:
Required 1 Balances :
Direct Materials = $432,000
Work in Process = $183,060
Finished Goods = $40,000
Required 2 total manufacturing costs for September :
Total manufacturing costs = $905,060
Explanation:
Ending September balance of the Direct Materials,
Raw Materials T - Account
Debit :
Opening Balance $31,500
Purchases $3,708,000
Totals $3,739,500
Credit :
Ending Balance $3,307,500
Work In Process $432,000
Totals $3,739,500
Ending September balance of Work in Process,
Work in Process T - Account
Debit :
Opening Balance $152,000
Raw Materials $432,000
Labor Cost $291,060
Overheads Applied $166,000
Totals $1,041,060
Credit :
Ending Balance $183,060
Transfer to Finished Goods $858,000
Totals $1,041,060
Ending September balance Finished Goods .
Finished Goods T - Account
Debit :
Opening Balance $260,000
Transfer from Work In Process $858,000
Totals $1,118,000
Credit :
Ending Balance $40,000
Trading Account $1,078,000
Totals $1,118,000
Calculation of Total Manufacturing Cost
Raw Materials $432,000
Labor Cost $291,060
Overheads Incurred $182,000
Total Manufacturing Cost $905,060
Judge Karen, a state appellate court judge, decides that the precedent for the case she is hearing is no longer correct due to technological changes. Her decision to overturn the case must be followed by___________.
Answer:
Increased publicity
Explanation:
if a judge overturns a case from a trial court and rejects precedent, the judge should get publicity for her decision and modification of the precedent so that it becomes a new way or basis of judging similar cases. In other words if judge Karen decides that the precedent before her to judge the case is outdated as a result of technological changes, she will decide on the case before her based on what she believes the precedent should reflect(new technologies) and this becomes the new basis for judging all such cases and as a result should be publicised for other judges to take note
Should underperforming restaurants be closed or sold?
Answer:
sold
Explanation:
Underperforming restaurants are those restaurants which does not perform well. The restaurant does not run properly and no people or less people visits the restaurant for eating.
This can be due to several factors. The restaurant's location may not be good, the restaurant may not provide good quality and tasty food, or people might not find their required menu in that restaurant. All these factors leads to less people visiting the restaurant and less revenue generation.
In such a case, the owner of the restaurant must sell the restaurant to some other party so that he does not undergo any losses. By selling the property he will get some amount of his investment which he could utilize in his further projects.
Also by selling the restaurant, the employees of that restaurant will not go out of job and can feed their family.
So, the restaurant should be sold.
What are the differences between first-generation OD and second-generation OD? What are the major changes between these two generations of OD practice? What do you think have been the losses or gains in the second generation of OD practice?
How many t-shirts would you recommend George order: 5,000, 7,500 or 10,000?
Answer:
10,000 t-shirts
Explanation:
Ordering 10,000 t-shirts will be adequate for George as this will increase his sales and profits and not only this he will also be getting discount on the purchase of the t-shirts. If any t-shirts are left they can be sold for a lower price to its regular customers or may be sold to another shopkeeper who sells lower priced t-shirts.
You produce an invoice for $1,346, increasing the Construction Income account. Show what other account is increased using the extended accounting equation.
Answer:
While the Construction Income account is increased by $1,346 (Equity - Retained Earnings, the other account that is increased is the Accounts Receivable account (Assets) in the extended accounting equation.
Explanation:
The accounting equation is Assets = Liabilities + Equity. This implies that every business transaction affects Assets, Liabilities, and Equity and always keep the equation in balance. A transaction may also affect only one side of the accounting equation. For example, cash received from customers (on credit account) will increase the Cash account and decrease the Accounts Receivable account, which only affects the Asset side of the equation.
What are the two major problems that affirmative action programs have faced?
Answer: quotas and lack of acceptance by some business people
Explanation:
Affirmative action programs are the programs that have been put in place to preventing discrimination that are based on color, sex, race, and national origins.
The programs focus on access to employment, education and also granting of special consideration to the racial minorities and historically excluded groups.
The two major problems that affirmative action programs have faced are quotas and lack of acceptance by some business people.
Quotas and resistance from some corporate leaders have been issues that affirmative action programmes have had to deal with.
Programmes known as affirmative action are those that have been put in place to stop prejudice based on national origins, sex, race, and colour.
The programmes put a lot of emphasis on providing racial minorities and other historically marginalized groups with access to work, education, and other opportunities.
Quotas and resistance from some corporate leaders have been the two main issues that affirmative action programmes have had to deal with.
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The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 3,800 sets per year. Annual cost data at full capacity follow:Direct labor $89,000Advertising $101,000Factory supervision $66,000Property taxes, factory building $20,000Sales commissions $63,000Insurance, factory $7,000Depreciation, administrative office equipment $3,000Lease cost, factory equipment $15,000Indirect materials, factory $20,000Depreciation, factory building $108,000Administrative office supplies (billing) $5,000Administrative office salaries $111,000Direct materials used (wood, bolts, etc.)$425,000Utilities, factory $40,0001. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is classified in two ways: first, as variable or fixed with respect to the number of units produced and sold; and second, as a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classified as either direct or indirect.)2. Compute the average product cost of one patio set.3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged?
Answer:
1.COST BEHAVIOUR
Variable Fixed
$642,000 $323,000
SELLING OR ADMINISTRATIVE
Cost $283,000
PRODUCT COST
Direct Indirect
$513,000 $276,000
2.$208
3. I would expect the average product cost per set to increase.
Explanation:
1. Calculation for the dollar amount of each cost item
COST BEHAVIOUR
Variable Fixed
Direct labor $89,000 $0
Advertising $0 $101,000
Factory supervision $0 $66,000
Property taxes, factory building$0 $20,000
Sales commissions$63,000 $0
Insurance, factory $0 $7,000
Depreciation, administrative office equipment$0 $3,000
Lease cost, factory equipment$0 $15,000
Indirect materials, factory $20,000 $0
Depreciation, factory building
Administrative office supplies (billing) $5,000 $0
Administrative office salaries $0 $111,000
Direct materials used (wood, bolts, etc.)$425,000 $0
Utilities, factory $40,000 $0
TOTAL COSTS $642,000 $323,000
SELLING OR ADMINISTRATIVE
Cost
Direct labor
Advertising $101,000
Factory supervision
Property taxes, factory building
Sales commissions $63,000
Insurance, factory
Depreciation, administrative office equipment $3,000
Lease cost, factory equipment
Indirect materials, factory
Depreciation, factory building
Administrative office supplies (billing) $5,000
Administrative office salaries$111,000
Direct materials used (wood, bolts, etc.)
Utilities, factory
TOTAL COSTS $283,000
PRODUCT COST
Direct Indirect
Direct labor $89,000 $0
Advertising
Factory supervision $0 $66,000
Property taxes, factory building$0 $20,000
Sales commissions
Insurance, factory $0 $7,000
Depreciation, administrative office equipment
Lease cost, factory equipment$0 $15,000
Indirect materials, factory$0 $20,000
Depreciation, factory building $0 $108,000
Administrative office supplies (billing)
Administrative office salaries
Direct materials used (wood, bolts, etc.)$425,000 $0
Utilities, factory$0 $40,000
TOTAL COSTS $514,000 $276,000
2.Computation of the average product cost of one patio set
Using this formula
Average product cost of one patio set =(Direct costs +Indirect costs)/Capacity set per year
Let plug in the formula
Average product cost of one patio set=($514,000+$276,000)/$3,800
Average product cost of one patio set=$790,000/$3,800
Average product cost of one patio set=$208
Therefore the Average product cost of one patio set will be $208
3. In a situation where the production drops to only 1,000 sets annually, I would expect the average product cost per set to increase.
1. The dollar amount of each cost item is entered under the appropriate headings as follows:
Fixed Variable Selling & Product
Costs Costs Admin Cost Cost
Direct labor $89,000 $89,000
Advertising $101,000 $101,000
Factory supervision $66,000 $66,000
Property taxes, factory building $20,000 $20,000
Sales commissions $63,000 $63,000
Insurance, factory $7,000 $7,000
Depreciation, administrative
office equipment $3,000 $3,000
Lease cost, factory equipment $15,000 $15,000
Indirect materials, factory $20,000 $20,000
Depreciation, factory building $108,000 $108,000
Administrative office supplies (billing) $5,000 $5,000
Administrative office salaries $111,000 $111,000
Direct materials used (wood, bolts, etc.)$425,000 $425,000
Utilities, factory $40,000 $40,000
Total costs $471,000 $602,000 $283,000 $790,000
2. The average product cost per set is $207.89 ($790,000/3,800).
3. If the Dorilane Company's production level drops to 1,000 sets annually, the average product cost per set will increase.
Thus, if the production level reduces to 1,000 sets annually, the average product cost will not decrease or remain unchanged, but will increase to $790.
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