Answer:
Unitary cost= $14
Explanation:
Giving the following information:
Production= 100,000
To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.
First, we need to calculate the total cost and then the unitary cost:
Total cost= 600,000 + 800,000= $1,400,000
Unitary cost= 1,400,000/100,000= $14
In cash basis accounting, for tax purposes:
a. Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid.
b. Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred.
c. Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid.
d. The cash basis is not allowed for businesses reported on Schedule C.
Answer: Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid.
Explanation:
In cash basis accounting method, it should be noted that revenues are recognized when they are gotten while for the expenses, they are recognized when they are paid out in cash.
The cash basis for of accounting is the opposite of the accrual method of accounting whereby revenue and expenses will be recognized when incurred.
True or False: A tax cut is less likely to change the composition of labor demand than a government spending increase.
Answer:
True
Explanation:
This is the case because tax cuts and government spending are instruments that could be used in expansionary fiscal policy.
Note that reduced taxes usually have a direct impact on the disposable income of a economy not the composition of labor demand. Tax cuts leads directly to consumption and savings increase, resulting from increase in disposable income in the economy.
In what way did Henry Ford’s use of the assembly-line method of production represent an advance in technology in automobile manufacturing?
Answer: a. It allowed workers to specialize on specific tasks and become more productive.
Explanation:
The Assembly line method of production that Henry Ford initiated at his plant was a technological game changer as it enabled workers to assemble cars faster and this mass produce Ford cars at a cheaper rate for the masses.
The Assembly line worked by putting workers at various stages of the assembly line where they would focus on installing only one or a few parts into the prospective vehicle. This way they were able to focus on that specific task, become more adept at it and thus become more productive.
The owner of a leased property conveys possession of the property to the tenant providing them with uninterrupted us of the property without interference from the owner. This is known as
Answer:
Quiet enjoyment
Explanation:
Quiet enjoyment is a clause in lease agreement that provides a guarantee that the tenant will occupy the property in peace without interference from any other claimants or the landlord.
For example this clause protects a tenant from being removed from a property by someone of higher rank or authority like an agent.
The law recognises quiet enjoyment even when it is not stated explicitly in a lease agreement. It is assumed that every tenant has a right to quiet enjoyment
Venture Capital Corporation loans Wally $15,000 to start a new business.Wally does not pay,but Venture fails to sue within the time prescribed by the applicable statute of limitations.Wally's promise to pay the debt even though recovery is barred:_________
A) needs new consideration.
B) needs no consideration.
C) is unenforceable regardless of any consideration.
D) needs legally sufficient and adequate consideration.
Answer:
B) needs no consideration.
Explanation:
In this scenario, Wally's promise to pay the debt even though recovery is barred needs no consideration. This is mainly due to the fact that the Corporation failed to sue within the statute of limitation that was set. Meaning they can no longer sue Wally in order to recover the loan that was given to him. If they were to try and sue Wally now the lawsuit would just be dismissed with no consideration given.
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?a. For Review tabb. Reviewed tabc. Recognized tab d. Excluded tab
Answer:
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?
a. For Reviewed tab
Explanation:
In QuickBooks online, you have the Reviewed tab where you can download at least the last 90 days of transactions, made with your bank or credit card. QuickBooks is also able to categorize all the downloaded transactions you have done. In the reviewed tab you can find all the accepted bank transactions.
E-tailers, such as Amazon and Expedia, that sell products and services directly to final buyers exclusively over the Internet are known as ________.
Answer:
E-tailers
Explanation:
E-tailers are also known as e-retailers. Where you can purchase things via the internet.
Glad I could help you!
Your grandfather has great faith in bonds and has heard about some "high yield bonds" that are available. He has asked you for your opinion. What advice will you give him?
Answer: That they are risky
Explanation:
Bonds tend to give a low return compared to other investments such as stocks which is because they offer a constant payout. However even with bonds there will still be those that promise a higher return than the others and this is because they are riskier.
Bonds are debt instruments which means that the rate they pay is directly related to the risk attached. This is because the interest payment is meant to compensate you for the risk you are taking by getting that bond.
If the yield/return is high it would therefore follow that the risk Is high as well. Your Grandfather should therefore be aware of this risk before investing because riskier bonds might not pay back.
World trade has grown substantially in the last 60 years. For example, while world output grew at an annual rate of 3.8% per year between 1950 and 2003, world exports grew at 10.8% per year over the same time period.
Which of the following help o explain the increase in international trade and finance since the 1950's?
a. International trade agreements such as the North American Free Trade Agreement (NAFTA)
b. An increasing number of affordable international flights
c. Changes in property rights
d. The widespread use of the Internet to conduct business.
Answer:
The correct answer is the option A: International trade agreements such as the North American Free Trade Agreement (NAFTA).
Explanation:
To begin with, the name of "North American Free Trade Agreement" or NAFTA, refers to the comercial agreement between the three nations of the countries of the norht of America that established that there is a bloc of free trade among Canada, Mexico and the United States that will benefit the three parties whose bloc have formed one of the largest trade blocs in the world by gross domestic product. Moreover, the agreement came into force in 1994 and since then the main purpose of it is to encourage the increase and development of international trade.
Sheridan Company has several outdated computers that cost a total of $18200 and could be sold as scrap for $6200. They could be updated for an additional $3000 and sold. If Sheridan updates the computers and sells them, net income will increase by $9000. What amount would be considered sunk costs
Answer:
$18200
Explanation:
Sunk cost is cost that has already been incurred and cannot be recovered. It should not be considered when making future decisions.
The computers costs $18200. This amount has already been incurred and it cannot be recovered.
1. A research project began with the selection of women who had recently had abdominal surgery. The project matched those women with controls and continued with measurements of abdominal muscle strength for both groups every three months for a year. This project was: A. Prospective study B. Retrospective study C. Experimental study D. Cross sectional study
Answer:
Abdominal rectus diastasis is a condition where the abdominal muscles are separated by an abnormal distance due to widening of the linea alba causing the abdominal content to bulge. It is commonly acquired in pregnancies and with larger weight gains. Even though many patients suffer from the condition, treatment options are poorly investigated including the effect of physiotherapy and surgical treatment. The symptoms include pain and discomfort in the abdomen, musculoskeletal and urogynecological problems in addition to negative body image and impaired quality of life. The purpose of this review was to give an overview of treatment options for abdominal rectus diastasis.
Results: The first treatment step is physiotherapy. However, evidence is lacking on which regimen to use and success rates are not stated. The next step is surgery, either open or laparoscopic, and both surgical approaches have high success rates. The surgical approach includes different plication techniques. The recurrence and complication rates are low, complications are minor, and repair improves low back pain, urinary incontinence, and quality of life. Robotic assisted surgery might become a possibility in the near future, but data are still lacking.
Conclusions: Evidence on what conservatory treatment to use is sparse, and more research needs to be done. Both open and laparoscopic surgery have shown positive results. Innovative treatment by robotic assisted laparoscopic surgery has potential, however, more research needs to be done in this area as well. An international guideline for the treatment of rectus diastasis could be beneficial for patients and clinicians.
Keywords: rectus diastasis, treatment options, physiotherapy, surgery, abdominoplasty, laparoscopy, robot assisted surgery
The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndt’s federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndt’s expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndt’s depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why? Ehrhardt, Michael C.. Corporate Finance: A Focused Approach (p. 93). Cengage Learning. Kindle Edition.
Answer:
a) Berndt Corporation
Income Statement
Sales revenue $12,000,000
All cost other than depreciation ($9,000,000)
Depreciation expense ($1,500,000)
EBIT $1,500,000
Income taxes ($600,000)
Net income $900,000
net cash flow = $900,000 + $1,500,000 = $2,400,000
b) if depreciation doubles, net profit will decrease to $0, but net cash flows will increase to $3,000,000
c) if depreciation decreases by 50%, net profit will increase to $1,350,000, but net cash flows will decrease to $2,100,000
d) Once a company is operating, its value is generally calculated based on its cash flows, therefore, I would select the option that increases the company's net cash flows (Congress doubles depreciation expense).
If the economy is in an expansionary period, appropriate policies to pursue may include: Group of answer choices an income tax cut that shifts the AD curve to the right. consumer investment incentives that shift the AD curve to the right business investment incentives that shift the AD curve to the left. a reduction in government spending that shifts the AD curve to the left.
Answer:
curve to the right business investment incentives
Suppose that hypothetically there are only two countries in the world: Japan and South Korea Now suppose that at the end of year 2, Japan has positive net exports of $20 billion against South Korea. In addition, Japan has earned $1 billion in interest from its South Korean assets over the course of year 2. Question: What are the respective balances for the current account, and the financial and capital account for Japan at the end of year 2
Answer:
i) $21 billion
ii) $0
iii) $0
Explanation:
GIVEN DATA : ( two countries )
At the end of year 2
net exports = $20 billion for Japan
Interest earned from assets = $1 billion for Japan
i) The balances for the current account for Japan
export value + interest earned from assets
= $20 billion + $1 billion = $21 billion
ii) Financial account for Japan
Financial account for Japan will be zero because there is no increase or decrease in number of its assets within the given period
iii) capital account for Japan
Capital account of Japan will will have a zero balance. this is because Capital account is used to record foreign investments, local investment and the reserve account as well. and there was no investment captured within the given time that was made by Japan
1. What are Regional Trading Blocs (RTBs)? Explain the 4 types of RTBs, making sure that the difference(s) between them is/are clearly stated as we move from one level to another. Discuss three (3) each of the advantages and disadvantages of the European Union to a named member country.
Answer:
Trading blocks are groups of countries who form trade agreements between themselves. Trading blocks can include
Free trade areas – elimination of tariffs between economies in the trading block
Customs union – free trade area + a common external tariff with non-members
Economic union/Single market – Customs union + common rules and regulations.
Different types of trading blocks
free-trade-customs-union
Trading blocks have become increasingly influential for world trade.
They have advantages in enabling free trade between geographically close countries. This can lead to lower prices, increased export potential, higher growth, economies of scale and greater competition.
However, it can lead to compromise as countries pool economic sovereignty. Also, the move to free trade tends to create winners and losers – with some domestic industries losing out to lower-cost imports.
Examples of Global trading blocks
Free_Trade_Areas
Free trade areas
European Union – The most integrated trading block. The EU27 have free trade and common regulations and are part of a customs union.
NAFTA – North Atlantic Free Trade Association. A free trade area between Canada, US and Mexico
ASEAN Free Trade Area Free trade area in South East Asia founded 1992. Includes: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar and Cambodia.
SAFTA South Asia free trade area based around the Indian sub-continent. Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Mercosur – a southern American trading block formed in 1991. Includes full members of Argentina, Brazil, Paraguay and Uruguay. With associate members including Bolivia, Chile, Colombia, Ecuador. Developed from free trade area to become customs union.
African Union 55 countries of the continent of Africa. Created to forge closer political and economic ties. It has aspirations to become a free trade area.
Difference between free trade area and customs union
A customs union has a common external tariff on imports. This means that it doesn’t matter which country the imports enter – because all countries have the same import tariff. This means there doesn’t need to be internal checking on ‘Rules of origin‘. For example, if imports from Africa enter Spain then if goods travel across the border from Spain to France, there is no need to check whether goods are paying the correct import tariff – because the import tariffs are all the same.
A disadvantage of joining a customs union is that a country is not able to pursue its own independent trade deals. However, since trade deals are complicated and take several years, there is an advantage to negotiating trade deals as part of a regional trade block – rather than separate individual countries.
Advantages of trading blocks
Tariff removal leads to trade creation – lower prices for consumers and greater opportunity for exporters.
Increased trade enables increased specialisation – which gives benefits of economies of scale (lower average costs from increased output)
gravity-theory
Catch-up effects. Countries joining a rich trading block can benefit from inward investment and increased trade opportunities. Countries in Eastern Europe have made considerable progress in catching up with average income levels in Western Europe.
Gravity theory of trade suggests that trade with countries in close proximity is the most important due to lower transport and similar cultural and economic ties.
Gives small countries a greater say in global trade agreements
Increased competition. The removal of tariffs creates greater choice for consumers. Therefore domestic firms have a greater incentive to cut costs to remain competitive.
Disadvantages of trading blocks
Joining a customs union may lead to increased import tariffs – which leads to trade diversion. For example, when the UK joined the EEC customs union, it required higher import tariffs on imports from former Commonwealth countries. This led to switch in demand towards higher-cost European countries and caused loss of business for Commonwealth countries
Increased interdependence on economic performance in other countries in trading block. If Eurozone goes into recession, it will affect all countries in the Eurozone. However, this is almost inevitable even if countries are not formally in a trading block due to a close relationship between trade cycles in different countries.
Income statement data for Boone Company for two recent years ended December 31, are as follows:
Current Year Previous Year
Sales $396,000 $330,000
Cost of goods sold 330,400 280,000
Gross profit $65,600 $50,000
Selling expenses $17,600 $16,000
Administrative expenses 16,520 14,000
Total operating expenses $34,120 $30,000
Income before income tax $31,480 $20,000
Income tax expenses 12,600 8,000
Net income $18,880 $12,000
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
Boone Company
Comparative Income Statement
For the Years Ended December 31
Current year Amount Previous year Amount Increase (Decrease) Amount Increase (Decrease) Percent
Sales $396,000 $330,000 $ %
Cost of goods sold 330,400 280,000 %
Gross profit $65,600 $50,000 $ %
Selling expenses 17,600 16,000 %
Administrative expenses 16,520 14,000 %
Total operating expenses $34,120 $30,000 $ %
Income before income tax $31,480 $20,000 $ %
Income tax expense 12,600 8,000 %
Net income $18,880 $12,000 $ %
b. The net income for Boone Company increased by 57.3% between years. This increase was the combined result of an in sales of 20% and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales.
Answer:
a. Boone Company
Statement showing comparative income statement
Particulars Current (A) Previous(B) CHANGE PERCENT
Year Year (C=A-B) (C/B*100)
Sales $396,000 $330,000 $66,000 20%
Cost of goods $330,400 $280,000 $50,400 18%
sold
Gross profit $65,600 $50,000 $15,600 31.2%
Selling $17,600 $16,000 $1,600 10%
expenses
Administrative $16,520 $14,000 $2,520 18%
expenses
Total operating $34,120 $30,000 $4,120 13.73%
expenses
Income before $31,480 $20,000 $11,480 57.4%
income tax
Income tax $12,600 $8,000 $4,600 57.5%
expenses
Net income $18,880 $12,000 $6,880 57.3%
b. The cost of goods sold increased at a rate LOWER than the increase in sales, thus causing the percentage increase in gross profit to be GREATER than the percentage increase in sales.
The carrying value of Blossom’s net identifiable assets, including the goodwill, at year-end is $855,000. Prepare Cullumber’s journal entry, if necessary, to record impairment of goodwill.
Answer:
Goodwill Impairment (Debit)
Goodwill (Credit)
Explanation:
In case goodwill is impaired, then the entry to record this impairment will be Goodwill Impairment Debit and Goodwill Credit.
By crediting the Goodwill, the account will be reduced. This shows that the business is currently worth less than is accounted for. The Goodwill account is reduced to identify this difference.
The Impairment loss is an expense and must be reflected in the income statement. Therefore, while we reduce Goodwill amount from balance sheet. We record the expense on the income statement, which would mean that the current year profit amount will be reduced.
Dye Trucking raised $240 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $7. If Dye had 55 million shares of stock before the recap, how many shares does it have after the recap
Answer: 20,714,286 shares
Explanation:
Find out the number of shares that was repurchased:
= Amount raised / stock price
= 240,000,000 / 7
= 34,285,714 shares
Number of shares after recap:
= Number of shares before recap - Shares repurchased
= 55,000,000 - 34,285,714
= 20,714,286 shares
A monopolist that practices perfect price discrimination has the same deadweight loss triangle as the single-price monopolist.
a) true
b) false
Answer:
The correct answer is the option B: False.
Explanation:
To begin with, the price discrimination strategy refers to a technique used by the companies in order to charge different prices to the different consumers regarding the fact of how much would they be able to pay for the product. When it comes to monopolies, a perfect price discrimination strategy would try as best as possible to capture the majority of the zone known as the "consumer surplus". And that is why that a company with a perfect price discrimination would face a small deadweight loss area due to the fact that with that strategy of price the monopolist will absorve as much as possible of that area becuase the triangle is half consumer surplus and half producer surplus.
Winston contracts to sell a plot of land called Blackacre to Paris for $500,000. Winston breaches the contract and Paris sues him. Blackacre's reasonable market value at the time of the breach was $525,000. Paris can recover: Group of answer choices only $25,000.
Answer:
Correct Answer:
C) only $25,000.
Explanation:
In the case between Blackacre and Paris over the piece of land, the value recoverable will be the difference between the original value of the land the the newest value of the land when the breach of contract occurs. Hence, the only amount recoverable by Paris would be $25, 000.
McKerley Corp. has preferred stock outstanding that will pay an annual dividend of $3.70 per share with the first dividend exactly 14 years from today. If the required return is 3.6 percent, what is the current price of the stock?
Answer:
$64.89
Explanation:
Calculation for the current price of the stock
First step is to find the preference stock value at end of 13 years
Using this formula
P13= Annual dividend/Required return
Let plug in the formula
P13=$3.70/.036
P13= $102.78
The second step is to calculate for the current price of the stock
Using this formula
P0= P13/(1+Required return)^Dividend years
Let plug in the formula
P0= $102.78/(1 + .036)^13
P0=$102.78/(1.036)^13
P0=$102.78/1.5837
P0=$64.89
Therefore the current price of the stock will be $64.89
In an attempt to bring about a change in the organization, what do you think might happen to The Learning Focus if Nemeroff fired all the existing writers and replaced them with new writers
Answer:
If all existing writers are replaced with new writers there could be a number of issues as the existing writers had experience and were use to of the type of writing required, they understand the nature of the reader. The new writers might fail to satisfy the old readers as they will be unaware of the taste the readers want and like to read. If learning focus Nemeroff fired all the existing writers the above described issues may appear.
Explanation:
If all existing writers are replaced with new writers there could be a number of issues as the existing writers had experience and were use to of the type of writing required, they understand the nature of the reader. The new writers might fail to satisfy the old readers as they will be unaware of the taste the readers want and like to read. If learning focus Nemeroff fired all the existing writers the above described issues may appear.
Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?
a. purchase of noncurrent assets
b. purchase of treasury stock
c. discarding an asset that had been fully depreciated.
Answer:
The answer is C.
Explanation:
Discarding an asset that had been fully depreciated is the correct answer. No exchange of cash was involved in this unlike the purchase of non current asset(which is a cash outflow under investing activities) and the purchase of treasury stock (which is a cash outflow under financing activities).
Discarding a fully depreciated asset only is a non cash transaction.
The income statement and selected balance sheet information for Direct Products Company for the year ended December 31 are presented below. Income Statement Sales Revenue Expenses S 41,600 Cost of Goods Sold Depreciation Expense Salaries and Wages Expense Rent Expense Insurance Expense Interest Expense Utilities Expense 17,500 1,300 8,300 3,800 1,550 1,450 Net Income S 6,650 Selected Balance Sheet Accounts Ending Beginning Balances Balances Accounts Recelvable Inventory Accounts Payable Prepaid Rent Prepaid Insurance Salaries and Wages Payable Utilities Payable $570 820 430 29 27 600 685 480 32 43 17
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
Answer:
Direct Products Company
Operating cash flow statement
For the year ended December 31, 202x
Net income $6,500
Adjustments to net income:
Depreciation expense $1,300Decrease in accounts receivable $30Decrease in prepaid insurance $5Increase in salaries payable $23Increase in utilities payable $7Increase in inventory ($135)Increase in prepaid rent ($7)Decrease in accounts payable ($50) $1,173Net cash flow provided by operating activities $7,673
Explanation:
Net Income $6,650
Depreciation Expense $1,300
ending beginning
Accounts Receivable $570 $600
Inventory $820 $685
Accounts Payable $430 $480
Prepaid Rent $29 $22
Prepaid Insurance $27 $32
Salaries Payable $66 $43
Utilities Payable $24 $17
If a company from Country A decides to sell merchandise to a company from Country B, then the company from Country A ________.
Answer: C) can denominate the sale in either currency and use the foreign exchange market to convert currency
Explanation:
The options to the question are:
A) will denominate the sale in its own currency since it is too hard to convert foreign currency
B) will denominate the sale in the currency of the buyer since it is too hard for them toconvert foreign currency
C) can denominate the sale in either currency and use the foreign exchange market to convert currency
D) can use the OTC market to convert receipts in the future and the exchange markets to convert receipts in the spot market.
Since the company from Country A I the one selling merchandise to the company from Country B, it means that the company from Country A can denominate the sale in either currency and use the foreign exchange market to convert currency.
Michael Company reports Total Assets of $254,000, Common Stock of $50,000, and Retained Earnings of $94,000. What are total liabilities at the end of the first year
Answer:
$110,000
Explanation:
Accounting equation : Assets - liabilities = Shareholder's equity
Liabilities = Assets - Shareholder's equity
Equity = $50,000 + $94,000 = $144,000
$254,000 - $144,000 = $110,000
Which of the following reasons would cause a company to reject an offer to accept business at a special price?
a. The additional sales will increase differential income.
b. The additional sales will not increase fixed expenses
c. The additional sales will increase fixed expenses
d. The additional sale will not conflict with regular sales.
Answer:
The additional sale will not conflict with regular sales.
Explanation:
Accept business at a special price if the additional sales conflict regular sales. That is, special price must maintain the status quo or improve it.
Presence indicators _____.
a. are small digital badges that people can embed in emails and on websites to share their contact information and social affiliations.
b. are visual elements used to change the aesthetic of a web page.
c. are things that others create we feel are worth redistributing to our social networks.
d. are an option to have one's profile reflected back to them from the perspective of others.
e. enable users to project an identity more vividly to others within a community
Answer: enable users to project an identity more vividly to others within a community.
Explanation:
The small digital badges that people can embed in emails and on websites to share their contact information and social affiliations are referred to as identity cards.
Skin/themes are the visual elements that are used to change the aesthetic of a web page.
Identity reflectors are option to have one's profile reflected back to them from the perspective of others.
Presence indicator allow users to project an identity more vividly to others within a community.
Cobe Company has already manufactured 17,000 units of Product A at a cost of $20 per unit. The 17,000 units can be sold at this stage for $410,000. Alternatively, the units can be further processed at a $240,000 total additional cost and be converted into 5, 800 units of Product B and 11, 400 units of Product C. Per unit selling price for Product B is $107 and for Product C is $52.
Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not.
Sell as is ProcessFurther
Sales
Relevant costs:
Total relevant costs
Income (loss)
Incremental net income (or loss) if processed further
The company should
Answer:
differential analysis:
No further process Process further Differential
amount
Sales revenue $410,000 $1,213,400 $803,400
Production costs ($340,000) ($580,000) ($240,000)
Operating income $70,000 $633,400 $563,400
The company should process further and sell products B and C because its operating income will increase by $563,400.
Factor Co. can produce a unit of product for the following costs: Direct material $ 8.40 Direct labor 24.40 Overhead 42.00 Total costs per unit $ 74.80 An outside supplier offers to provide Factor with all the units it needs at $43.40 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:
Answer: Buy since the relevant cost to make it is $46.45.
Explanation:
given data:
Direct material = $ 8.40
Direct labor = 24.40
Overhead = 42.00
Total costs per unit = $ 74.80
had to complete the question.
Multiple Choice
Buy since the relevant cost to make it is $63.85.
Make since the relevant cost to make it is $46.45.
Buy since the relevant cost to make it is $46.45.
Make since the relevant cost to make it is $33.40.
Buy since the relevant cost to make it is $33.40.
Solution:
Relevant cost to consider = Direct Material + Direct labor + (Overhead * 30%)
= $8.70 + $24.70 + ($43.50 * 30%)
= $46.45
Answer:
The units should purchased from the outside supplier.
Explanation:
production costs:
Direct material $8.40
Direct labor $24.40
Overhead $42.00
Total costs per unit $74.80
avoidable costs = $8.40 + $24.40 + (30% x $42) = $45.40
unavoidable costs = $74.80 - $45.40 = $29.40
costs of purchasing from outside vendor = $43.40 + $29.40 = $72.80
since the total costs of purchasing the unit from an outside vendor are lower than the total production costs, then they should buy them from the outside supplier.