Answer:
Average rate of return= 10.17 %
Geometric return = 9.23%
Explanation:
Geometric average return
This is compounded annual rate of return which is used to measure the performance of an asset over a certain number of years. It helps to measure the return generated by an investment taking into account the volatility .
Unlike the arithmetic average the geometric average gives an idea of the real rate taking into account of volatility
The formula below
Geometric Return =(1+r1) (1+r2) ...... (1+rn)^1/n
Geometric Average return =
(1.12× 1.19× 1.21× 0.88× 1.26× 0.95)^(1/6) - 1 =0.09233168
Geometric return =0.0923 × 100= 9.23%
Geometric return = 9.23%
Average rate of return
The average return is the sum of the returns over the years dividend by the Numbers of returns
Average return = sum of return / No of returns
(12% + 19% + 21% + (12%) + 26% + (5%))/6 =10.17 %
Average rate of return= 10.17 %
Geometric return = 9.23%
The Cutting Department at Blanc Company had beginning work in process inventory of 4,000 units, transferred out 9,000 units, and had 2,000 units in ending work in process inventory. The number of units started into production by the Cutting Department during the month is
Answer:
The number of units started into production is 7,000.
Explanation:
Number of units started into production = Units transferred out + units of ending work in process - units of beginning work in process
= 9,000 + 2,000 - 4,000
= 7,000
On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.
Sales units: First quarter 5,200; second quarter 6,700; third quarter 7,000.
Ending raw materials inventory: 40% of the next quarter’s production requirements.
Ending finished goods inventory: 25% of the next quarter’s expected sales units.
Third-quarter production: 7,380 units.
The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.
a) Prepare a production budget by quarters for the 6-month period ended June 30, 2020.
b) Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020.
Answer:
Hardin Company
Production budget
For the first semester of 2020
First quarter Second quarter Total
Sales units 5,200 6,700 11,900
Planned ending 1,675 1,750 1,750
inventory
Total production 6,875 8,450 13,650
required
- beginning inv. -1,300 -1,675 -1,300
Units to be 5,575 6,775 12,350
produced
Hardin Company
Raw materials budget
For the first semester of 2020
First quarter Second quarter Total
Units to be 5,575 6,775 12,350
produced
Materials required 3 3 3
per unit
Materials needed 16,725 20,325 37,050
for production
Planned ending 8,130 8,856 8,856
inventory
Total materials 24,855 29,181 45,906
needed
- beginning inv. -6,690 -8,130 -6,690
Materials to be 18,165 21,051 39,216
purchased
Cost per unit $5 $5 $5
Total cost of $90,825 $105,255 $196,080
direct materials
B MC Qu. 7-200 Krepps Corporation produces ... Krepps Corporation produces a single product. Last year, Krepps manufactured 29,010 units and sold 23,900 units. Production costs for the year were as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $214,674 $121,842 $243,684 $319, 110 Sales totaled $1,159,150 for the year, variable selling and administrative expenses totaled $126,670, and fixed selling and administrative expenses totaled $205,971. There was no beginning Inventory. Assume that direct labor is a variable cost. Under absorption costing, the ending Inventory for the year would be valued at:_________ (Round your Intermediate calculations to 2 decimal places.)
a) $158.410
b) $228.410
c) $219.910
d) $185.910
Answer:
a) $158.41
Explanation:
Unit product cost under absorption costing = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead / Total manufactured units
= (214,674 + 121,842 + 243,684 + 319,110) /29,010
= $899,310 / 29,010 unit
= $31 per unit
Ending inventory = $29,010 - $23,900 / $31
= $5110 * 31 per unit
= $158,410
Duval inc budgets direct materials at $1/liter and requires 4 liters per unit of finished product. April’s activities show usage of 832 liters to complete 196 units at a cost of $798.72. Calculate the direct materials price and quantity variances and indicate favorable or unfavorable results.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Duval inc budgets direct materials at $1/liter and requires 4 liters per unit of the finished product.
April’s activities show usage of 832 liters to complete 196 units at a cost of $798.72.
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Actual price= 798.72/832= $0.96
Direct material price variance= (1 - 0.96)*832
Direct material price variance= $33.28 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 4*196= 784
Direct material quantity variance= (784 - 832)*1
Direct material quantity variance= $48 unfavorable
The following information is available for the first month of operations of Diacox Inc., a manufacturer of sports apparel:
Sales $2,050,000
Gross profit 490,000
Indirect labor 152,000
Indirect materials 45,000
Other factory overhead 515,000
Materials purchased 801,000
Total manufacturing costs for the period 1,710,000
Materials inventory, end of period 36,800
Using the given information, determine the following:__________.
Cost of goods sold
Direct materials cost
Direct labor cost
Answer:
Cost of goods sold= $1,560,000
Direct material cost= $764,200
Direct labor= $233,800
Explanation:
(A) Cost of goods sold= Sales -gross profit
Sales= $2,050,000
Gross profit= $490,000
Therefore, the cost of goods sold can be calculated as follows
= $2,050,000-$490,000
= $1,560,000
(B) Direct materials cost= Materials purchased-materials inventory ending
Material purchased= $801,000
Material inventory ending= $36,800
Therefore, the direct material cost can be calculated as follows
= $801,000-$36,800
= $764,200
(C) Direct labor= Total manufacturing cost-direct material cost-manufacturing overhead
Total manufacturing cost= $1,710,000
Direct material cost= $764,200
Manufacturing overhead= indirect labor+indirect material+other factory overhead
$152,000+$45,000+$515,000
= $712,000
Therefore, the direct labor can be calculated as follows
= $1,710,000-$764,200-$712,000
= $233,800
JG Asset Services is recommending that you invest $1,275 in a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures
Answer:
The amount that will be received when CD matures is $1514.30
Explanation:
To calculate the amount that will be received at the maturity of the CD, we simply need to calculate the future value of the invested amount using annual compounding. The formula for the future value that we will use is,
Future value = Present value * (1+r)^t
Where,
r is the rate of interestt is the time in yearsFuture value = 1275 * (1+0.035)^5
Future value = $1514.30
Which of the following conditions would necessitate the use of non-verbal communication instead of verbal communication?A) Low physical distanceB) Need for immediate feedbackC) Personal nature of communicationD) Familiarity with the listenerE) Increased noise
Answer:
E) Increased noise
Explanation:
The answer is that the condition that would necessitate the use of non-verbal communication instead of verbal communication is increased noise because the noise is any type of sound that affects the verbal communication and in a case of increased noise, it could be necessary to use non-verbal communication to be able to deliver a message.
The other options are not right because they don't affect the verbal communication in a way that forces you to use non-verbal communication.
Graham Motors manufactures specialty tractors. It has two divisions: a Treactor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire:Direct material cost per tire: $15Conversion costs per tire: $3 (Assume the $3 includes only the variable portion of conversion costs.)Fixed manufacturing overhead cost for the year is expected to total $116,000. The Tire Division expects to manufacture 58,000 tires this year. The fixed manufacturing overhead per tire is $2 ($116,000 divided by 58,000 tires).Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Graham Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price?• The lowest acceptable transfer price is $_______, the Tire Division's ______________.• The highest acceptable transfer price is $_______, the Tire Division's _____________.
Answer:
The LOWEST acceptable transfer price is $18 the Tire Division's variable cost per tire.
The HIGHEST acceptable transfer price is $75the Tire Division's market price.
Explanation:
Calculation for the lowest acceptable transfer price and the highest acceptable transfer price
Variable Cost per tire:
Direct Material $15
Conversion cost $3
=$18 per tire
The LOWEST acceptable transfer price is $18 Tire division variable cost per tire
Based on the information we were told that the market price per tire is $75 which means that the HIGHEST transfer price is $75 tire division market price.
Therefore If Graham Motors has a negotiated transfer price policy The LOWEST acceptable transfer price is $18 the Tire Division's variable cost per tire While The HIGHEST acceptable transfer price is $75 the Tire Division's market price.
The Big Five Personality refers to the structures and propensities of people that explain their patterns of thought, emotion, and behavior. Although there are literally thousands of traits that can be used to describe an individual's personality, most traits reflect one of five broad dimensions or factors of personality: conscientiousness, agreeableness, neuroticism, openness to experience, and extraversion. It is especially useful for managers to understand the personality traits of their employees since these traits often have important implications for workplace attitudes and behaviors, such as performance and commitment. The following activity takes you through the thought process of a manager trying to hire a new sales associate based on personality assessments of the candidates. Imagine that you are a midlevel manager at a paper company and you are in the process of hiring a new sales associate. So far, you have scheduled interviews with three potential candidates. You just concluded your first interview and want to spend some time reflecting on the notes you took. In particular, you want to make sure that you have a solid grasp of each candidate's personality traits since you know how important that can be on the job. Read through the notes and classify them according to the Big Five Taxonomy of personality. Conscientiousness Agreeableness Neuroticism Took Initiative Openness to Experience Cold Hardworking Extraversion
Answer and Explanation:
Please find attachments
The big five taxonomy of personality refers to the "Big five" personality traits believed to be the traits on which many different personalities of people revolve. They include:extraversion, agreeableness, openness, conscientiousness, and neuroticism.
In the example above, based on the manager's interview with Cynthia. The manager can understand her personality by classifying using the big five personality traits based on information gathered from her and recommendations:
Cynthia took initiative: this falls under openness which are people who are creative and adventurous and like to learn new things
Cynthia could be hardworking: this falls under conscientiousness characterized by people who are generally organized and careful about things
Cynthia follows procedures: this falls under agreeableness which is the tendency to be trust and be cooperative
Cynthia seemed nervous: this falls under neuroticism which is the tendency for one to be emotionally unstable and usually have mood swings, anxiety or be sad
Cynthia was described as cold: this is also fall under neuroticism as Cynthia could be depressed
On February 20, services valued at $60,000 relating to the organization of a corporation were performed in exchange for 1,000 shares of its $25 par value common stock.
Make the necessary journal entry.
Answer: The solution has been attached
Explanation:
From the question, we are informed that on February 20, services valued at $60,000 relating to the organization of a corporation were performed in exchange for 1,000 shares of its $25 par value common stock.
The common stock was calculated as:
= 1000 × $25
= $25,000
The paid on capital in excess of the par common stock was calculated as:
= $60,000 - $25,000
= $35,000
The journal has been solved and attached.
Ambiance Inc. buys back 3,000 shares of its $10 par value common stock from investors at $45 per share. This stock repurchase would be recorded with a debit to: A. Treasury Stock for $30,000, a debit to Additional Paid-in Capital for $105,000, and a credit to Cash for $135,000. B. Treasury Stock and a credit to Cash for $135,000. C. Cash and a credit to Treasury Stock for $135,000. D. Treasury Stock and a credit to Cash for $30,000.
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A stock had returns of 15.51 percent, 22.47 percent, −8.68 percent, and 9.43 percent over four of the past five years. The arithmetic average return over the five years was 12.71 percent. What was the stock return for the missing year?
Answer:
24.82%
Explanation:
Arithmetic average = sum of observations / number of observations
Let x = the stock return for year 5
12.71 % = (15.51% + 22.47% −8.68% + 9.43 + x) /5
Multiply both sides by 5
63.55% = (5.51% + 22.47% −8.68% + 9.43 + x)
63.55% = 38.73% + x
x = 63.55% - 38.73% = 24.82%
Mullineaux Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 11 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 35 percent. What is Mullineaux WACC
Answer:
Mullineaux Corporation
WACC (Weighted Average Cost of Capital):
WACC = (11% of 70%) + (5% of 5%) + (7% of 25%) (1 - 35%)
= 0.077 + 0.0025 + 0.0175(65%)
= 0.09087
= 9.1%
Explanation:
Target Capital Structure:
Common stock = 70%
Preferred stock = 5%
Debt = 25%
Total = 100%
Cost of:
Equity = 11%
Preferred stock = 5%
Debt (pretax) = 7%
Tax rate = 35%
Mullineaux's WACC is the weighted average cost of its capital sources, including equity and debt. It means that Mullineaux Corporation has to weigh each class of capital based on their capital structure weights in order to calculate the average. This WACC therefore represents the hurdle rate which a project must meet for Mullineaux Corporation to accept or reject the project.
Sarah takes out a loan today for $26,000 at an interest rate of 2 percent a year. She plans to repay the loan after 5 years. How much will he have to pay?
Sarah will have to pay:__________
Answer:
$28,706.10
Explanation:
The computation of the amount of pay is shown below:
Here we have to find the future value by using the following formula
Future value = Present value × (1 + interest rate)^number of years
= $26,000 × (1 + 0.02)^5
= $28,706.10
We simply applied the above formula so that the amount of pay could be come and the same is to be considered
Hoosier Manufacturing operates a production shop that is designed to have the lowest unit production cost at an output rate of 145 units per hour. In the month of July, the company operated the production line for a total of 265 hours and produced 30,400 units of output.What was its capacity utilization rate for the month?
Answer:
79.1%
Explanation:
Hoosier manufacturing operates a production shop that is modelled to have the lowest unit of production
The output rate is 145 units per hour
In the month of July the company operated the production line for 265 hours
30,400 units of output were produced
Therefore, the capacity utilization rate can be calculated as follows
= 30,400 units/265 hours ×145
= 30,400/38,425
= 0.791×100
= 79.1%
Hence the capacity utilization rate for the month is 79.1%
The manager of a crew that installs carpeting has tracked the crew’s output over the past several weeks, obtaining these figures:
Week Crew Size Yards Installed
1 4 97
2 3 71
3 4 98
4 2 54
5 3 63
6 2 52
a. Compute the labor productivity for each of the weeks. (Round your answers to 2 decimal places.)
Week Crew size Labor productivity
(Yards/Person)
1 4
2 3
3 4
4 2
5 3
6 2
b. Which crew size works best?
Answer:
a. Labor productivity is calculated as: Labor productivity = Total Yards Installed / Total Crew Size
Hence, the labor productivity for each week is;
Week 1 = 97 / 4 = 24.25
Week 2 = 71 / 3 = 23.67
Week 3 = 98 / 4 = 24.5
Week 4 = 54 / 2 = 27
Week 5 = 63 / 3 = 21
Week 6 = 52 / 2 = 26
b. A crew of size 2 works the best as they generate the highest labor productivity of 27. The crew with highest number generate a labor productivity of 24.5
Factors of production, such as physical capital, human capital, and technological knowledge, are crucial to economic growth. Therefore, institutions that foster strong incentives and create an environment favorable to the development of such factors of production are vital to economic growth. Which of the following are examples of such institutions?
A. Competitive and open markets.B. Free-riding culture.C. A dependable legal system.D. Political stability.E. Government expropriation.
Answer:
A. Competitive and open markets.
C. A dependable legal system.
D. Political stability.
Explanation:
A Competitive and open Market ensures that people have enough incentives to invest in the development of factors of production because it rewards that investment with a healthy return. In a Competitive market, unfair competition will not be present therefore people will get equal opportunities to make returns.
A dependable Legal System and Political Stability go hand in hand to ensure that investors will have enough faith in the system to want to invest in Factors of Production. If a country is stable politically and abides by the rule of law, an investor will be assured that when they invest, these investments will be protected by the powers that be and their returns will not be impacted by political upheavals and breaches of contract that cannot be rectified.
What is the amount that Cooper Enterprises should report as its pension liability on its balance sheet as of December 31, 2018?
Answer: $600,000
Explanation;
Pension Liability refers to the amount the company is to pay its employees a pension less the actual amount it has to pay its employees.
It is therefore expressed as;
= Obligations - Assets
In this scenario that would be;
= Projected Benefits Obligation - Plan Assets (at Fair Value)
= 1,200,000 - 600,000
= $600,000
An investor with a balanced domestic portfolio who is looking for diversification and returns in the event that U.S. markets do not continue to expand, would be most interested in investing in which of the following?
a. Equities in Emerging Markets
b. Equities in U. S. companies with international appeal
c. Equities in U. S. companies involved in exports of their products
d. Equities in Italian wine exporting companies
Answer:
Option A, Equities in Emerging Markets, is the right answer.
Explanation:
A person who is not interested to invest in the U.S market or company then will not prefer the U.S companies for their diversification because the economic contraction in the U.S will affect these companies. He will be willing to invest in the equities in the emerging market. Moreover, he will not invest only in the foreign company because it will not provide him with the diversification. Therefore, the option “a” is correct.
The currency drain ratio is 0.5 of deposits and the banks' reserve ratio is 0.4. What is the money multiplier?
Answer: 1.67
Explanation:
From the question, we are informed that the currency drain ratio is 0.5 of deposits and the banks' reserve ratio is 0.4.
The money multiplier is calculated as:
(1 + the currency drain ratio)/( the reserve ratio + the currency drain ratio)
= (1 + 0.5)/(0.5 + 0.4)
= 1.5/0.9
= 1.67
Therefore, the money multiplier will be 1.67.
Mason Corporation had $1,150,000 in invested assets, sales of $1,228,000, income from operations amounting to $226,000, and a desired minimum rate of return of 12%. Round your answer to two decimal places. The investment turnover for Mason Corporation is a.0.85 b.1.07 c.1.28 d.1.60
Answer:
b.1.07
Explanation:
Investment turnover ratio determines the times when the portfolio of investment is sold during a particular period of time e.g Monthly, Annually, etc. The higher turnover results in more commission earned by the broker who is selling the portfolio.
Investment Turnover = Sales / Invested Assets
Investment Turnover = $1,228,000, / $1,150,000
Investment Turnover = 1.067826
Investment Turnover = 1.07 ( Rounded off to 2 decimals places )
"A customer who is short 1 ABC Jan 65 Call wishes to create a "short call spread." The second option position that the customer must take is:"
Answer:
long 1 ABC Jan 75 Call
Explanation:
This type of customer (or investor) is bearish about the market, i.e. he/she believes that the stock prices will drop. The investor will try to create a net credit position (the credit spread = $75 - $65). The maximum possible profit is created when the stock price falls below $65, and the maximum possible loss would occur if the price went above $75. This investor is a net seller, since it is a short call spread.
TB MC Qu. 6-107 Mcmurtry Corporation sells a product for ... Mcmurtry Corporation sells a product for $250 per unit. The product's current sales are 13,600 units and its break-even sales are 10,608 units. The margin of safety as a percentage of sales is closest to:
Answer:
The answer is 22%
Explanation:
Margin of Safety equals:
(Current sales level - break-even point) ÷ Current sales level
Break-even sales = $2,652,000 (10,608 units x $250 per unit)
Current sales = $3,400,000 (13,600 units x $250 per unit)
Therefore, Margin of Safety is:
($3,400,000 - $2,652,000) ÷ $3,400,000
= 0.22
Expressed as a percentage = 22%
Calculate the inventory turns when Sales is $200,000,000, Cost of sales is $160,000,000, Average inventory is $ 40,000,000 and Carrying cost is 12%
68646868855764566799%%$^€$^__
Answer:
68646868857764564566799
You can spend $150 on either a new Kindle or a new pair of boots. If you choose to buy the new kindle, the economic cost of it is:
Answer:
$300
Explanation:
The economic cost is the sum of implicit cost and explicit cost.The implicit cost is the cost by implication, which is the cost of alternative forgone.
The explicit cost is the actual cost requiring actual cash flow in settling it.
Economic cost=cost of new kindle+cost of alternative forgone(new pair of boots)
Economic cost=$150+$150
The explicit cost is also the cost incurred from accounting point of view
Sanders, a 62-year-old single individual, sold his principal residence for the net amount of $500,000 after all selling expenses. Sanders bought the house 15 years ago and has occupied it until it sold. On the date of sale, the house had a cost basis of $200,000. Within six months, Sanders purchased a new house for $600,000. What amount of gain should Sanders recognize from the sale of the residence g
Answer:
$50,000
Explanation:
Recognized gain can be calculated by deducting the exclusion available from the realized gain. To qualify for exclusion from the realized gain Sanders has met all the requirements of exclusion.
NOTE: Requirments for exclusion are given at the end of solution
DATA
Sale proceeds = $500,000
Cost basis = $200,000
exclusion available for single person = $250,000
Gain =?
Calculation
Realized gain on sale of home = Sale proceeds – Cost basis
Realized gain on sale of home = $500,000 - $200,000
Realized gain on sale of home = $300,000
Recognized gain = Realized gain - exclusion available
Recognized gain = $300,000 - $250,000
Recognized gain = $50,000
Requirements for exclusion
1. You've owned the home for two of the last five years.
2. You used the home as your principal residence for two of the last five years.
3. You haven't used the exclusion on another property sale within the last two years.
When product discontinuance is being considered, changes in fixed cost and ______________ will impact the decision. Group of answer choices inventory turnover contribution margin sunk costs administrative cost
Answer:
variable
Explanation:
if one is fixed the other must be changeable as a variable that cant easily be controlled
Consider the case of a good with external benefits. If you plant trees in front of your house, the neighborhood is more attractive, and trees create shade, provide oxygen, and a home for birds and squirrels. Thus the benefits to society are greater than the benefits to you. If the planting of trees is a private choice, you will plant too few trees relative to the socially optimal quantity, because the private value to you is less than the social value.
1. Which of the following would not help to correct this problem?
a. Subsidize consumer purchases of trees to plant.
b. Tax homeowners who plant trees.
c. Subsidize nurseries that sell trees for planting.
d. Have the government provide trees to homeowners.
e. All of the above would help to correct the problem.
2. If the government pays for a program to increase the planting of trees, who will win and lose from the program?
Winners will be:_________.
a. producers
b. society as a whole
c. taxpayers
d. consumers
Losers will be:_________.
a. producers
b. society as a whole
c. consumers
d. taxpayers
3. The gains to the winners will be ___________ the losses to the losers.
greater than - equal to - less than
Answer:
b. Tax homeowners who plant trees.
b. society as a whole
d. taxpayers
greater than
Explanation:
A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.
Taxing homeowners who plant trees would increase the cost of planting and thus discourage planting
Everyone would benefit from a project that generates positive externality.
If the government pays for a program to increase the planting of trees, the cost would be borne by taxpayers. So, they lose
he management accountant for Giada's Book Store has prepared the following income statement for the most current year: Cookbook Travel Book Classics Total Sales $68,000 $126,000 $53,000 $247,000 Cost of goods sold 40,000 66,000 21,000 127,000 Contribution margin 28,000 60,000 32,000 120,000 Order and delivery processing 21,000 24,000 11,000 56,000 Rent (per sq. foot used) 2,000 5,000 4,000 11,000 Allocated corporate costs 8,000 8,000 8,000 24,000 Corporate profit $ (3,000) $23,000 $9,000 $29,000 If the cookbook product line had been discontinued prior to this year, the company would have reported ________.
Answer:
Giada's Book Store
The company would have reported a total profit of $19,000, which is $10,000 less.
Explanation:
a) Data and Calculations:
Income statement for the most current year:
Cookbook Travel Book Classics Total
Sales $68,000 $126,000 $53,000 $247,000
Cost of goods sold 40,000 66,000 21,000 127,000
Contribution margin 28,000 60,000 32,000 120,000
Order and delivery processing 21,000 24,000 11,000 56,000
Rent (per sq. foot used) 2,000 5,000 4,000 11,000
Allocated corporate costs 8,000 8,000 8,000 24,000 Corporate profit $ (3,000) $23,000 $9,000 $29,000
Corporate profit = $29,000
less allocated cookbook costs 10,000
Adjusted corporate profit = $19,000
b) Discontinuing the Cookbook product line would have eliminated the contribution the product line makes to defraying Rent and Allocated Corporate costs totalling $10,000 unless the Rental space was a variable cost.
Cullumber Industries incurs unit costs of $7 ($5 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers to make 14,700 of the assembly part at $6 per unit. If the offer is accepted, Cullumber will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Cullumber will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer and Explanation:
The preparation of the analysis that depicts the total cost saving is presented below:
Particulars Make Buy Net Income or decrease
Variable
Manufacturing Cost $73,500 - $73,500
(14,700 × $5)
Fixed
Manufacturing cost $29,400 $29,400 -
(14,700 × $2)
Purchase price
(14,700 × $6) - $88,200 ($88,200)
Total annual cost $102,900 $117,600 ($14,700)
Based on the total annual cost the company should make the product as it saves the cost by $14,700