Answer:
Total unit cost $8.80
Total Costs Transferred out $730,400
Explanation:
In Process Costing we find the individual unit costs and total costs transferred by multiplying it with the equivalent no of units.
As the units are 100 percent complete the Equivalent units are 83,000 units for both materials and conversion.
Saline Solutions
Weighted-Average Process
Materials in Department S $6.40
Conversion costs Department S $2.40
Total unit cost $8.80
Total No of units 83,000
Total Costs $8.80
Total Cost Transferred Out $730,400
Total Costs Transferred to Materials = $ 6.4 * 83,000=$ 531200
Total Costs Transferred to Conversion = $ 2.4 * 83,000=$ 199200
Total Costs Transferred= $ 531200+$ 199200= $ 730400
Rusthe Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 74 units were sold. Date Explanation Units Unit Cost Total Cost May 1 Inventory 30 $9 $270 15 Purchase 25 10 250 24 Purchase 38 11 418 Total 93 $938 Collapse question part (a) Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 5.125.) Weighted-average unit cost
Answer:
$10.086 Per units
Explanation:
Weighted-average unit cost
=Inventory on May 1 + Purchase on May 15 + Purchase on May 24 ÷ Total number of units
$270+$250+$418÷30+25+38
=$938÷ 93
=$10.086 per units
Therefore the WEIGHTED AVERAGE UNIT COST is $10.086 per units
(a) For calculating weighted-average cost, the cost of goods sold is divided by units available for sale. The weighted-average unit cost for Rusthe. Inc is $10.086 per units.
The COGS and inventory amounts are determined using a weighted average in the Weighted Average Cost (WAC) technique of inventory valuation in accounting. The weighted average cost method divides the price of the items up for grabs by the quantity of them. Under IFRS accounting as well as GAAP, the WAC approach is acceptable.
The weighted-average unit cost is calculated as follows:
Inventory on May 1 + Purchase on May 15 + Purchase on May 24 ÷ Total number of units
= ($270+$250+$418) ÷30+25+38
=$938÷ 93
=$10.086 per units
Therefore $10.086 is the weighted-average cost per unit.
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Luker Corporation uses a process costing system. The company had $164,500 of beginning Finished Goods Inventory on October 1. It transferred in $841,000 of units completed during the period. The ending Finished Goods Inventory balance on October 31 was $162,200.
The entry to account for the cost of goods manufactured during October is:
Answer:
Debit Cost of Goods Sold $843,300
Credit Finished Goods Inventory $843,300
Explanation:
Luker Corporation entry to account for the cost of goods manufactured during October is:
Debit Cost of Goods Sold $843,300
Credit Finished Goods Inventory $843,300
Cost of Goods Sold = Beginning FG + cost of goods manufactured - Ending
FG $164,500 + 841,000 - 162,200 = $843,300
Recall on February 1, Derrick Company established a $200 petty cash fund. On February 15, when the fund balance reached $7, the petty cash custodian prepared a petty cash report that summarized receipts for postage ($140) and printing ($54).
Prepare the necessary journal entry.
Answer:
Dr Printing Expense $140
Dr Postage Expense $54
Cr Cash Over and Short $1
Cr Cash $193
Explanation:
Derrick Company
Journal entry
Dr Printing Expense $140
Dr Postage Expense $54
Cr Cash Over and Short $1
Cr Cash $193
Cash over and short
Receipts for postage ($140) printing ($54)
Fund balance $7
$140+$54+$7=$201- 200 petty cash fund
=$1
The question pertains to creating a journal entry for a business's petty cash fund. Derrick Company spent $194 out of its $200 petty cash fund, which needs to be replenished. The journal entry will debit Postage Expense for $140, debit Printing Expense for $54, and credit Cash for $194.
Explanation:The subject of this question relates to the creation of a journal entry regarding a petty cash fund for a business entity, the Derrick Company. The Derrick Company established a $200 petty cash fund on February 1. On February 15, the fund balance had dwindled to $7 and the petty cash custodian prepared a report indicating expenditures for postage ($140) and printing ($54).
Using this information, we can create the necessary journal entry. The total spent from the petty cash fund is $194 ($140 for postage and $54 for printing). This amount needs to be replenished. The appropriate journal entry will be: debit Postage Expense for $140, debit Printing Expense for $54, and credit Cash for $194.
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Vivian goes to an auction and sees a rare antique lamp that is an identical match to one she already has. At the proper time she bids on the lamp and is the highest bidder. Even though she is the highest bidder, the auctioneer refuses to accept her bid and withdraws the lamp from the auction. Can the auctioneer do that?
Answer:
Most auctions are without reserve and therefore the auctioneer cannot withdraw the lamp.
Explanation:
Every auction seems to be either "of-reserve" versus "without-reserve." So the reaction to whether an auction house manages higher bids depends on that form of bidding being carried out. In an offering with reserves, the auction house may reject a higher offer (retain the privilege to reject ...) in which any better bid should be approved in an offering without deposit.
Put differently, the auction house is not obliged to deliver to the top purchaser in a with reserved sale. Essentially, the next bigger raise reflects the minimum price.
During the year, the following selected transactions affecting stockholders' equity occurred for Navajo Corporation: a. Feb. 1 Repurchased 200 shares of the company's own common stock at $23 cash per share. b. Jul. 15 Sold 130 of the shares purchased on February 1 for $24 cash per share. c. Sept. 1 Sold 100 of the shares purchased on February 1 for $22 cash per share. Required: 1. Prepare the journal entry required for each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Feb. 1
Common Stock $4,600 (debit)
Cash $4,600 (credit)
Jul. 15
Cash $3,120 (debit)
Common Stock $3,120 (credit)
Sept. 1
Cash $2,860 (debit)
Common Stock $2,860 (credit)
Explanation:
Feb. 1
Common Stock $4,600 (debit)
Cash $4,600 (credit)
200 shares × $23 = $4,600
Jul. 15
Cash $3,120 (debit)
Common Stock $3,120 (credit)
130 shares × $24 = $3,120
Sept. 1
Cash $2,860 (debit)
Common Stock $2,860 (credit)
130 shares × $22 = $2,860
Which of the following is a disadvantage of providing flexibility in benefit choice? Group of answer choices There is a risk that these plans would increase the attrition rate. The flexible benefits plans are typically discriminatory in nature. There is a risk that employees may choose an inappropriate benefits package. The flexible benefits plans do not cover higher-risk employees.
The main disadvantage of providing flexibility in benefit choice is that -There is a risk that employees may choose an inappropriate benefits package.
Explanation:
Let us consider the various options given:-
There is a risk that these plans would increase the attrition rate:The flexibility benefit package does not lead to an increase in attrition rate rather it is a measure to hold back the employees The flexible benefits plans are typically discriminatory in nature:The plans are not discriminatory because it is up to the disposal of the employees to select a flexible benefit plan of their choice.e nature of the flexible benefit plan cannot be discriminatory The flexible benefits plans do not cover higher-risk employees-No such option is mentioned in the flexible benefit planThus we can say that -The main disadvantage of providing flexibility in benefit choice is that -There is a risk that employees may choose an inappropriate benefits package.
The disadvantage of providing flexibility in benefit choice is the risk of employees choosing an inappropriate benefits package.
Explanation:A disadvantage of providing flexibility in benefit choice is that there is a risk that employees may choose an inappropriate benefits package. When employees have the freedom to select their own benefits, they may not have the knowledge or understanding to make informed decisions about which options are most suitable for their needs. This can result in employees choosing benefits that do not meet their requirements or are not cost-effective.
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Pretzelmania, Inc., issues 5%, 20-year bonds with a face amount of $50,000 for $44,221 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually on June 30 and December 31. Required: 1. & 2. Record the bond issue and first interest payment on June 30, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your intermediate computations and final answers to the nearest whole dollar amount.)
Answer: Please see Explanation for answer.
Explanation:
January 01, 2021:
Cash Debit 44,221
Bonds Payable Credit 44,221
Since the bonds were sold at a discount, the entry to record the first interest payment (using straight line amortization of the premium) would be:
Interest expense ($44,221× 6% × 6months/12months ) = $1,326.63 =$1,327
Cash is given as ($50,000 × 5% ×6months /12months) = $1,250
June 30, 2021:
Interest Expense Debit---$1,326.63 Bonds Payable Credit $77
Cash Credit $1,250
The bond issued by Pretzelmania, Inc. is recorded by debiting Cash for $44,221, and crediting Bonds Payable for $50,000 and Discount on Bonds Payable for $5,779. The first interest payment on June 30, 2021, is recorded by debiting Interest Expense for $1,394.48 and then crediting Cash for $1,250 and Discount on Bonds Payable for $144.48.
Explanation:The subject of this question refers to accounting for bonds issued at a discount, a topic in Business studies. Pretzelmania, Inc. issued a 5%, 20-year bond with a face value of $50,000 but they sold it for $44,221, meaning it was sold at a discount because the market interest rate was higher (6%) than the bond's coupon rate (5%).
1. Record the bond issue:
When the bond was issued on January 1, 2021, Pretzelmania, Inc. received cash of $44,221. The journal entry would be:
Debit: Cash $44,221
Credit: Bonds Payable $50,000
Credit: Discount on Bonds Payable $5,779 ($50,000 - $44,221 = $5,779 discount)
2. Record the first interest payment:
The company will need to pay interest semiannually. The payment on June 30, 2021, will be calculated as 5% of face value divided by 2 ($50,000 * 5% / 2 = $1,250). Also, they have to amortize part of the discount. The interest expense for the period will be the semiannual payments plus the discount divided by the number of payments ($5,779 / 40 payments = $144.48). The journal entry will be:
Debit: Interest Expense $1,394.48 ($1,250 + $144.48)
Credit: Cash $1,250
Credit: Discount on Bonds Payable $144.48.
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Assuming that overhead in the machining department is allocated on the basis of machine hours, and overhead in the assembly department is allocated on the basis of direct labor cost, the departmental overhead rates per unit of the related allocation bases in the Machining and Assembly Departments respectively will be:110% and $15.00.$5.00 and 50%.$5.00 and 200%.$8.00 and 50%
Question
The complete question is as follows:
Machining Assembly
Direct Labour 16,000 12,000
Direct labour cost 20,000 15,000
Machine hours 5,000 1,000
Overhead($) 25,000 30,000
Answer
Machining Assembly
Overhead absorption rate = $5 per hour 200% of labour cost
Explanation:
Overhead absorption rate is used to charged overheads to output achieved. It is calculated as follows:
OAR = Budgeted overhead / Budgeted activity
Machining Assembly
Overhead absorption rate 25,000/5000 hrs 30,000/15000 × 100
= $5 per hour 200% of labour cost
Final answer:
The overhead rate for the Machining Department is 110% based on machine hours, and the overhead rate for the Assembly Department is $15.00 per unit based on direct labor cost.
Explanation:
To determine the departmental overhead rates per unit of related allocation bases in the Machining and Assembly Departments when overhead is allocated based on machine hours for Machining and direct labor cost for Assembly, we must calculate the rates using the given data:
For Machining: Overhead is at a 110% rate, and the cost per hour is given as $24/hour.For Assembly: Overhead is $15.00 per unit when based on labor cost.The provided cost examples of labor plus machine costs ($720+$600, $960+$400, $1200+$200) do not directly relate to the overhead rates but demonstrate different allocation possibilities within a manufacturing context. Looking at the structure of the expense distribution, it is evident that allocation bases such as machine hours and labor costs are used to determine the overhead applied to each product or service.
Therefore, the departmental overhead rates per unit for the Machining Department is 110% and for the Assembly Department is $15.00 respectively.
Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now: Group of answer choices
Answer:
$600,000
Explanation:
Economic profit is accounting profit less implicit cost or opportunity cost.
Opportunity cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.
Economic profit = Accounting profit - Opportunity cost
Accounting profit is total revenue less total cost.
Accounting profit = total revenue - total cost
Total revenue = $525,000 + $600,000 = $1,125,000.
Total cost = $175,000 + $45,000 + $200,000 = $420,000
Opportunity cost = $105,000
Accounting profit = $1,125,000 - $420,000 = $705,000
Economic profit = $705,000 - $105,000 = $600,000
I hope my answer helps you
Veneer Company has two service departments and two producing departments. The number of employees in each department is: Personnel 10 Cafeteria 25 Producing Department A 406 Producing Department B 199 640 The department costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $43,520 during a given period, the amount of cost allocated to Department B under the direct method would be: $13,532.00. $14,314.84. $27,608.00. $0.
Answer:
$13,532 .00
Explanation:
The cost allocation is usually based on a measurable factor such as area occupied, number of students etc. The more the measurable factor related to a unit/department, the more the cost assigned to the departments on the basis of the size of the measurable value.
Total number of employees
= 640
the amount of cost allocated to Department B under the direct method would be
= 199/640 * $43,520
= $13,532
Tobin Supplies Company expects sales next year to be $500,000. Inventory and accounts receivable will "increase $80,000" to accommodate this sales level. The company has a steady profit margin of 10 percent with a 20 percent dividend payout. How much external financing will Tobin Supplies Company have to seek
Answer:
External funds needed = $40,000.
Explanation:
An increase in the firm's retained earnings (a component of the shareholder's equity) arises as a result of higher sales volume, thereby making the Asset = Liability + Shareholder's Equity Equation unbalanced.
Therefore, there must be an increment in the firm's assets by an equal amount in order to re balance the equation. If there is an increase in assets by a greater magnitude than retained earnings increment, the gap is filled by external financing (which is a liability and increases the liability component of the equation).
Net income = Sales * profit margin = $500000*10% = $50000
Dividend= Net income * payout ratio = $50000*20%= $10000
Increase in retained earnings = Net income - Dividend = $(50000-10000)
= $40000
Increase in assets = $80000
External funds needed = $(80000-40000) = $40,000.
Project management boils down to asking which questions?
Select an answer:
a. How will you know when you're done? And how well did the project go?
b. What's your plan?
c. What problem are you solving? And how are you going to solve it?
d. all of these answers
Answer: d. all of the answers
Explanation: Project management typically involves the planning, build-up, implementation, and closeout of projects and is defined as the organization and management of resources such as people, materials, etc. in such a way that a given project is completed within defined scope, quality, time and constraints of costs. In this, it asks questions bordering on planning, (what problem needs solving, people involved, and what will be done?), implementation and close-out (when would the project end, how would you know you have arrived at its completion, how do you go about it?) etc.
In project management, key questions include identifying the problem, formulating a plan, defining success criteria and evaluating the project performance. Therefore, the complete answer is 'd. all of these answers'.
Explanation:Project management involves overseeing and guiding a project from start to finish. The correct answer to your question is d. all of these answers. Project management essentially asks, firstly, 'What problem are you solving?' This question defines the objective or purpose of the project. The next question is 'How are you going to solve it?' which involves creating a plan and determining the resources needed. 'How will you know when you're done?' pertains to the predefined goals and success criteria that signify the completion of the project. And lastly, 'How well did the project go?' is a reflection question that allows for review and improvement for future projects.
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Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 7,300 checks per day. The daily interest rate is .016 percent. The bank charges a lockbox fee of $125 per day.
What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The NPV of accepting the lockbox agreement is $32.68, and the net annual savings if the service were to be adopted would be $11,927.80.
Explanation:The premise of the student's question is within the realm of finance, specifically dealing with the potential value of implementing a lockbox service. The lockbox system would decrease the collection time by a day, implying that the firm would be able to use funds one day earlier than usual. The net present value (NPV) can be calculated considering the value of the daily collections, one day's worth of interest, and the cost of the lockbox service.
First, you determine the daily collections by multiplying the average receipt size by the number of checks. That will yield: $135 * 7,300 checks = $985,500 daily collections.
Then, calculate the value of accelerating the collection by one day. You do this by multiplying the daily collections by the daily interest rate. That will yield: $985,500 * 0.00016 = $157.68.
From the $157.68, subtract the cost of the lockbox service to get the daily net benefit: $157.68 - $125 = $32.68.
For the annual savings, multiply the daily net benefit by the number of days in a year: $32.68 * 365 = $11,927.80.
So, the NPV of accepting the lockbox agreement is $32.68, and the net annual savings if the service is adopted would be $11,927.80.
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Ayala Architects incorporated as licensed architects on April 1, 2017. During the first month of the operation of the business, these events and transactions occurred:Apr. 1 Stockholders invested $18,270 cash in exchange for common stock of the corporation.1 Hired a secretary-receptionist at a salary of $381 per week, payable monthly.2 Paid office rent for the month $914.3 Purchased architectural supplies on account from Burmingham Company $1,320.10 Completed blueprints on a carport and billed client $1,929 for services.11 Received $711 cash advance from M. Jason to design a new home.20 Received $2,842 cash for services completed and delivered to S. Melvin.30 Paid secretary-receptionist for the month $1,524.30 Paid $305 to Burmingham Company for accounts payable due.Ayala Architects incorporated as licensed architecAyala Architects incorporated as licensed architec Journalize the transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)Post to the ledger T-accounts. (Post entries in the order of journal entries presented in the question.)Prepare a trial balance on April 30, 2017.
Journalizing transactions involves recording the double-entry impacts of business events (investment, expenses, revenue) for Ayala Architects. Ledger accounts are then updated with these transactions to track the financial position. Finally, a trial balance is prepared to ensure the accounting equation is maintained.
Explanation:The question involves journalizing transactions for Ayala Architects for the first month of operation, posting these transactions to ledger T-accounts, and preparing a trial balance. To journalize transactions, one must understand the double-entry bookkeeping system, where each transaction affects at least two accounts and the total debits equal total credits. For example, when stockholders invest cash in exchange for common stock, cash (asset) increases, and common stock (equity) increases.
Key transactions include the investment by stockholders, payment of office rent, purchase of supplies on account, and receipt of cash for services rendered. At the end of the month, expenses such as the salary of the secretary-receptionist and payments to suppliers are acknowledged.
To complete the ledger and trial balance, each transaction entry is posted to the corresponding T-account, and then the trial balance is prepared by listing all accounts and their final balances to ensure that total debits equal total credits.
Schrade Company bought a machine for $128,000 cash. The estimated useful life was four years and the estimated residual value was $6,500. Assume that the estimated useful life in productive units is 135,000. Units actually produced were 58,000 in year 1 and 60,000 in year 2. Determine the appropriate amounts to complete the following schedule. (Round your answers to the nearest dollar amount. Do not round intermediate calculations.) Depreciation Expense for Net Book Value at the End of Year 2 Year 2 Method of Depreciation Straight-line Units-of-production Double-declining-balance Year 1 Year 1
Answer:
Net book value (NBV) at the end of Year 2, under:
straight-line method is $67,250units-of-production method is $21,800double-declining balance is $32,000If there is need for NBV for Year 1, simply subtract the depreciation for Year from the cost.
Explanation:
Under straight-line method, depreciation expense is (cost - residual value) / Estimated useful life = ($128,000 - $6,500) / 4 years = $30,375 yearly depreciation expense.
Accumulated depreciation for 2 years is $30,375 x 2 years $60,750.
The net book value of the asset (cost - accumulated depreciation) is: $128,000 - $60,750 = $67,250.
The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($128,000 - $6,500) / 135,000 units x 58,000 units = $52,200/year
At Year 2, depreciation = ($128,000 - $6,500) / 135,000 units x 60,000 units = $54,000/year
Accumulated depreciation for 2 years is $52,200 + $54,000 = $106,200.
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in year 2.
The NBV under this method is is: $128,000 - $106,200 = $21,800.
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/4 years = 25%, then 25% multiplied by 2 to give 50%
At Year 1, 50% X $128,000 = $64,000
At Year 2, 50% X $64,000 ($128,000 - $64,000) = $32,000
Accumulated depreciation for 2 years is $64,000 + $32,000 = $96,000.
The NBV under this method is is: $128,000 - $96,000 = $32,000.
The Schrade Company must calculate depreciation using straight-line, units-of-production, and double-declining-balance methods. The straight-line method results in a $67,250 net book value at the end of year 2, while units-of-production show $21,800, and the double-declining balance shows a $32,000 net book value.
Explanation:The Schrade Company needs to calculate depreciation using three different methods: straight-line, units-of-production, and double-declining-balance. The cost of the machine is $128,000 with a residual value of $6,500 and an estimated useful life of four years or 135,000 units. Here's how the calculations are done for each:
Straight-line depreciation: This method spreads the cost evenly over the useful life of the asset. Annual straight-line depreciation is calculated as (Cost - Residual value) / Useful life in years. In this case, ($128,000 - $6,500) / 4 = $30,375 per year. After two years, the accumulated depreciation is $30,375 * 2 = $60,750 and the net book value at the end of year 2 is $128,000 - $60,750 = $67,250.Units-of-production depreciation: This method allocates the cost based on the actual use of the machine. The depreciation per unit is (Cost - Residual value) / Total estimated units. It equals ($128,000 - $6,500) / 135,000 = $0.9 per unit. For year 2, with 60,000 units produced, the depreciation expense is 60,000 * $0.9 = $54,000. The total accumulated depreciation over two years is ($58,000 * $0.9) + ($60,000 * $0.9) = $106,200, and the net book value at the end of year 2 is $128,000 - $106,200 = $21,800.Double-declining-balance depreciation: This method accelerates the depreciation expense. The calculation involves doubling the straight-line rate and applying it to the book value at the beginning of each year, not reducing it by the residual value. The double-declining rate is (100% / 4 years) * 2 = 50%. In year 1, the depreciation expense is $128,000 * 50% = $64,000. The net book value at the end of year 1 is $128,000 - $64,000 = $64,000. For year 2, we apply the same 50% rate on the new book value: $64,000 * 50% = $32,000. Hence, the net book value at the end of year 2 is $64,000 - $32,000 = $32,000.Please note that the double-declining-balance method will not depreciate the asset below its residual value. The calculations provided are simplified and the company's accounting policies should be considered for exact figures.
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Break-Even Point Radison Enterprises sells a product for $103 per unit. The variable cost is $70 per unit, while fixed costs are $217,800. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $110 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $110 per unit units
Answer:
Instructions are below.
Explanation:
Giving the following information:
Break-Even Point Radison Enterprises sells a product for $103 per unit. The variable cost is $70 per unit, while fixed costs are $217,800.
To calculate the break-even point both in dollars and units, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 217,800/ (103 - 70)
Break-even point in units= 6,600 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 217,800/ (33/103)
Break-even point (dollars)= $679,800
Now, the selling price is $110:
Break-even point in units= 217,800/(110-70)= 5,445 units
Break-even point (dollars)= 217,800/ (40/110)= $598,950
Consider an economy with two types of firms, S and I. S firms all move together. I firm's move independently. For both types of firms, there is a 60% probability that the firms will have a 15% return and a 40% probability that the firms will have a −10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 20 firms of (a) type S, and (b) type I
Answer:
The volatility (standard deviation) of (a) type S is 12.24% and the volatility (standard deviation) of (b) type I is 2.7%
Explanation:
In order to calculate the volatility (standard deviation) of a portfolio that consists of an equal investment in 20 firms of (a) type S, and (b) type I, we have to calculate first the expected return as follows:
expected return=(60%×15%)+(40%×−10%)
=0.09-0.04=0.05=5%
Therefore, the volatility (standard deviation) of (a) type S=√(0.60(15%-5%)∧2+0.40(-10%-5%)∧2)
=12.24%
As I stock moves independently, therefore the volatility (standard deviation) of (b) type I=
SD(I Stock)= 12.24%
√20
=2.7%
Sheffield Corp. sells merchandise on account for $2700 to with credit terms of 2/10, n/30. Splish Brothers Inc. returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Sheffield Corp. make upon receipt of the check
Answer:
Debit Bank for $2,058, Purchase Return for $600, and Discount allowed for $42; while Credit Accounts receivable for $2,700.
Explanation:
Sales after return before discount = $2,700 - $600 = $2,100
Discount allowed = $2,100 * 2% = $42
Check amount = $2,100 - $42 = $2,058
This implies that $2,058 is received in cash and the journal entries upon receipt of check will be as follows:
Details Dr ($) Cr ($)
Bank 2,058
Discount allowed 42
Purchases return 600
Accounts receivable 2,700
To record check received from and discount allowed to Splish Brothers Inc.
An agent is employed by First Patriot Bank and Trust Company of Connecticut as a banking representative. The agent is registered in the State with a general securities license through First Patriot Securities, a separate operating subsidiary of First Patriot Holdings - the parent company of the bank. A retired couple that is making their monthly visit to the bank to deposit their social security checks asks the agent about the appropriateness of investing in either mutual funds or certificates of deposit. Which statement is TRUE regarding the actions that the agent may take when giving a response to these customers?The agent may give advice to the couple about the suitability of investing in either mutual funds or certificates of deposit
Answer:
Explanation:
Which statement is TRUE regarding the actions that the agent may take when giving a response to these customers?
The agent may give advice to the couple about the suitability of investing in either mutual funds or certificates of deposit
Schager Company purchased a computer system at a cost of $60,000 on 1/1/2019. The estimated useful life is 8 years, and the estimated residual value is $5,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year (2020)
Answer:
$11,250
Explanation:
The computation of depreciation expense for the second year is given below:-
Double declining rate = 1 ÷ 8 × 2
= 25%
Here, for computing the depreciation for 2nd year we need to first calculate the 1st year of depreciation.
Depreciation for the 1st year = Purchase cost × Double declining rate
= $60,000 × 25%
= $15,000
Depreciation for the 2nd year = (Purchase cost - Depreciation for the 1st year) × Double declining rate
= ($60,000 - $15,000) × 25%
= $45,000 × 25%
= $11,250
Marvel Woodcraft makes furniture. Marvel’s expected sales are 36,000 bookcases for the quarter. The company begins the quarter with inventory of 7,000 bookcases and wants to have enough finished bookcases on hand at the end of the quarter to provide for 20% of the next quarter’s expected sales of 40,000 bookcases. Based on this information, how many bookcases need to be produced during the quarter?
Answer:
The production requirement for this quarter is 37000 bookcases.
Explanation:
The required closing inventory for this quarter is = 0.2 * 40000 = 8000 bookcases.
The production requirement for this quarter can be calculated by calculating the bookcases that needs to be produced in addition to the opening inventory to meet this quarter's sales and the required closing inventory. Thus, the production for this quarter should be,
Production = Sales requirement for the quarter + Closing Inventory - Opening Inventory
Production = 36000 + 8000 - 7000 = 37000 bookcases
Marvel Woodcraft needs to produce 37,000 bookcases during the quarter, considering their sales projections, initial inventory, and the inventory they wish to have by the end of the quarter.
Marvel Woodcraft needs to calculate the number of bookcases to produce during the quarter, taking into account projected sales, initial inventory, and desired end-quarter inventory. To begin with, Marvel anticipates selling 36,000 bookcases in the quarter. Initially, they have 7,000 bookcases in inventory. By quarter's end, Marvel aims to have inventory sufficient for 20% of the next quarter's projected sales of 40,000 bookcases, which equals 8,000 bookcases.
To determine how many bookcases need to be produced, we start with the expected sales (36,000) and add the desired ending inventory (8,000). From this sum (44,000), we subtract the starting inventory (7,000), resulting in a total production requirement of 37,000 bookcases for the quarter.
On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortland bonds have a stated interest rate of 6%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):January 1, 2018 7.0 %June 30, 2018 8.0 %December 31, 2018 9.0 %Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2018 (ignoring brokerage fees).2. Prepare all appropriate journal entries related to the bond investment during 2018, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate journal entries related to the bond investment during 2018, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.
Answer:
Explanation:
Requirement 1
Bond Fair Value at 1/1/2018:
Interest [($150,000 x 6%) / 2] x 14.21240 * = $ 63,956
Principal $150,000 x 0.50257 ** = 75,386
Present value of the receivable $139,342
* present value of an ordinary annuity of $1: n=20, i=3.5% (=7% ÷ 2)
Number of semiannual payment period (n)= Number of years x 2 = 10 x 2
= 20 years payment period
present value of $1: n=20, i=3.5% (=7% ÷ 2)
January 1, 2018
Investment in bonds (face amount)..................... 150,000
Discount on bond investment (difference)...... 10,658
Cash (price of bonds)....................................... 139,342
Requirement 2
January 1, 2018
Investment in bonds (face amount)..................... 150,000
Discount on bond investment (difference)...... 10,658
Cash (price of bonds)....................................... 139,342
June 30, 2018
Cash [(150,000 x 6%) / 2]..................................... 4,500
Discount on bond investment (difference)......... 377
Interest revenue [($150,000 – 10,658) x 7%] / 2 ... 4,877
December 31, 2018
Cash (6% / 2 x $150,000)..................................... 4,500
Discount on bond investment (difference)......... 390
Interest revenue [{$150,000 – ($10,658 – 377)} x 7%] / 2 4,890
Note: For held-to-maturity investments, there are no adjustments to fair value.
Requirement 3
January 1, 2018
Investment in bonds (face amount)..................... 150,000
Discount on bond investment (difference)...... 10,658
Cash (price of bonds)....................................... 139,342
June 30, 2018
Cash ($150,000 x 6%) / 2 .................................... 4,500
Discount on bond investment (difference)......... 377
Interest revenue [($150,000 – 10,658) x 7%] / 2 .. 4,877
Bond Fair Value at June 30, 2018:
Interest [($150,000 x 6%) / 2] x 13.13394 * = $ 59,103
Principal $150,000 x 0.47464 ** = 71,196
Present value of the receivable $130,299
present value of an ordinary annuity of $1: n=19, i=4% (=8% ÷ 2)
** present value of $1: n=19, i=4% (=8% ÷ 2)
January 1 initial cost $139,342
Increase from discount amortization 377
June 30 amortized initial cost $139,719
Comparing the amortized initial cost with the fair value of the bonds on that date provides the amount needed to adjust the investment to its fair value.
June 30 amortized initial cost $139,719
June 30 fair value 130,299
Fair value adjustment needed $ 9,420
Net unrealized holding gains and losses—I/S .......................... ..... 9,420
Fair value adjustment................................................................... 9,420
December 31, 2018
Cash ($150,000 x 6%) / 2.................................... 4,500
Discount on bond investment (difference)......... 390
Interest revenue [{$150,000 – ($10,658 – 377)} x 7%] / 2 4,890
Bond Fair Value at December 31, 2018:
Interest [($150,000 x 6%) / 2] x 12.15999 * = $ 54,720
Principal $150,000 x 0.45280 ** = 67,920
Present value of the receivable $122,640
* present value of an ordinary annuity of $1: n=18, i=4.5% (=9% ÷ 2)
** present value of $1: n=18, i=4.5% (=9% ÷ 2)
June 30 amortized initial cost $139,719
Increase from discount amortization 390
Dec. 31 amortized initial cost $140,109
Comparing the amortized initial cost with the fair value of the bonds on that date provides the amount needed to adjust the investment to its fair value.
Dec. 31 amortized initial cost $140,109
Dec. 31 fair value 122,640
Fair value adjustment balance needed: debit/(credit) $ 17,469
Less: Current fair value adjustment debit/(credit) (9,420)
Change in fair value adjustment needed $ 8,049
Net unrealized holding gains and losses—I/S .......................... ..... 8,049
Fair value adjustment................................................................... 8,049
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $ 21 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 40 % will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 42 % of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?
a. The incremental sales associated with introducing the new pizza under the assumption of equal spending are $8.4 million.
b. In the scenario where 42% of switchers would choose another brand, the incremental sales are $12.04 million.
Explanation:a. Incremental sales with equal spending:
Original pizza sales: Unknown, but let's call it X.
New pizza sales from new customers: 60% of $21 million = $12.6 million.
New pizza sales from switchers: 40% of X.
Total new pizza sales: $12.6 million + 0.4X.
Incremental sales: Difference between total new pizza sales and original pizza sales: ($12.6 million + 0.4X) - X = $8.4 million.
b. Incremental sales with brand switching:
Switchers from original pizza: 40% of X.
Switchers to healthier pizza: 58% of switchers = 0.58 * 40% of X = 0.232X.
Switchers to another brand: 42% of switchers = 0.42 * 40% of X = 0.172X.
New pizza sales from switchers: 0.232X.
Sales lost to another brand: 0.172X.
Total new pizza sales: $12.6 million + 0.232X.
Net incremental sales: Difference between total new pizza sales and sales lost to another brand: ($12.6 million + 0.232X) - 0.172X = $12.04 million.
Therefore, introducing the new pizza leads to higher incremental sales even when accounting for customers switching to another brand, highlighting the potential market opportunity for healthier options.
The incremental sales when introducing the new pizza are $12.6 million without considering potential loss to competitors and $16.128 million considering the potential customer switch to other brands.
To determine the incremental sales from the introduction of Pisa Pizza's new healthier pizza, we need to account for the sales cannibalization from their original pizza and potential losses to competitors.
Part A:
Assume customers will spend the same amount on either version. The firm expects $21 million in sales per year for the new pizza. Since 40% of these will come from customers switching from the original pizza, the actual incremental sales will be:
Total new sales: $21 millionCannibalization rate: 40%Sales cannibalized: $21 million × 0.40 = $8.4 millionIncremental sales: $21 million - $8.4 million = $12.6 millionPart B:
Now, if 42% of the customers who would switch to the healthier pizza instead switch to another brand if Pisa Pizza does not introduce a healthier pizza, the incremental sales calculation changes:
Total new sales: $21 millionSales lost to another brand if not introduced: $21 million × 0.42 × 0.40 = $3.528 millionRemaining cannibalized sales: $8.4 million - $3.528 million = $4.872 millionIncremental sales: $21 million - $4.872 million = $16.128 millionIn this scenario, Pisa Pizza's net incremental sales would increase due to retaining customers who would otherwise switch to competitors.
You are interested in buying a share of stock in LMU Company. You expect a dividend payment of $10 next year and that the dividend will grow by 6% per year thereafter. You desire a 8% return on your purchase. According to the Gordon growth model, what is the maximum price you would pay for a share of this stock?
Answer:
The correct answer is $500.
Explanation:
According to the scenario, the computation of the given data are as follows:
Dividend = $10
Growth rate = 6%
Rate of return = 8%
So, we can calculate the Maximum price of the stock by using following formula:
Price of stock = Dividend ÷ ( Rate of return - Growth rate)
By putting the value,
Price of stock = $10 ÷ ( 8% - 6%)
= $10 ÷ 0.02
= $500.
Millstone Company produces only one product. Normal capacity is 20,000 units per year, and the unit sales price is $5. Relevant costs are: (picture attached)
Compute the following:
(1) The break-even point in units of product
(2) The break-even point in dollars of sales
(3) The number of units of product that must be produced and sold to achieve a profit of $10,000
(4) The sales revenue required to achieve a profit of $10,000
Answer:
(1) 13,000 units
(2) $65,000
(3) 18,000 units
(4) $90,000
Explanation:
(1) Break-even point (in units) = Fixed Cost / Contribution Margin Per unit
Fixed Cost = Factory Overhead + Marketing Expenses + Administrative Expenses
Fixed Cost = $15,000 + $5,000 + $6,000
Fixed Cost = $26,000
Selling Price = $5.00
Variable Cost = Materials + Direct Labor + Factory Overhead + Marketing Expense
Variable Cost = $1.00 + $1.20 + $0.50 + $0.30
Variable Cost = $3.00
Contribution Margin Per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin Per unit = $5 - $3
Contribution Margin Per unit = $2
Break-even point (in units) = $26,000 / $2
Break-even point (in units) = 13,000 units
(2) Break-even point (in dollars) = Fixed Cost / Contribution Margin Ratio
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $2 / $5
Contribution Margin Ratio = 0.40
Break-even point (in dollars) = $26,000 / 0.40
Break-even point (in dollars) = $65,000
(3) Net Income = Revenue - Variable Cost - Fixed Cost
Net Income = $10,000
Fixed Cost = $26,000
Let x = Number of Units
$10,000 = $5x - $3x - $26,000
Add $26,000 on both sides we get;
$2x = $10,000 + $26,000
x = $36,000 / $2
x = 18,000 units
(4) Sales Revenue = Sales per unit x Number of units
Sales Revenue = $5 per unit x 18,000 unit
Sales Revenue = $90,000
Calculation of break-even point in units of product
Fixed Cost = Factory Overhead + Marketing Expenses + Administrative Expenses
Fixed Cost = $15,000 + $5,000 + $6,000
Fixed Cost = $26,000
Selling Price = $5.00
Variable Cost = Materials + Direct Labor + Factory Overhead + Marketing Expense
Variable Cost = $1.00 + $1.20 + $0.50 + $0.30
Variable Cost = $3.00
Contribution Margin Per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin Per unit = $5 - $3
Contribution Margin Per unit = $2
Break-even point (in units) = Fixed Cost / Contribution Margin Per unit
Break-even point (in units) = $26,000 / $2
Break-even point (in units) = 13,000 units
Calculation of the break-even point in dollars of sales
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $2 / $5
Contribution Margin Ratio = 0.40
Break-even point (in dollars) = Fixed Cost / Contribution Margin Ratio
Break-even point (in dollars) = $26,000 / 0.40
Break-even point (in dollars) = $65,000
Calculation of number of units of product that must be produced and sold to achieve the profit
Net Income = $10,000
Fixed Cost = $26,000
Net Income = Revenue - Variable Cost - Fixed Cost
Let x = Number of Units
$10,000 = $5x - $3x - $26,000
$2x = $10,000 + $26,000
x = $36,000 / $2
x = 18,000 units
Calculation of the sales revenue required to achieve the profit
Sales Revenue = Sales per unit x Number of units
Sales Revenue = $5 per unit x 18,000 unit
Sales Revenue = $90,000
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2. The La Salle Bus Company has decided to purchase a new bus for $95,000 with a trade-in of their old bus. The old bus has a BV of $10,000 at the time of the trade-in. The new bus will be kept for 10 years before being sold. Its estimated SV at that time is expected to be $15,000.
a. Determine which asset class of the bus.
b. Determine annual Straight-Line Depreciation charge.
Answer:
a.
9 recovery period years class
b.
$8,889 per year
Explanation:
a.
Buses are 9 years recovery period class , in which it is depreciated using historical method and it has 5 years GDS class life.
b.
Straight Line depreciation is a method of depreciation in which the cost of the asset net of residual value is divided over useful life.
We will depreciate this asset for only 9 years because it has 9 years class, even it will be kept for 10 years but the depreciation charged for 9 years.
Depreciation rate = ( Cost - Salvage Value ) / useful life = ($95,000 - $15,000) / 9 = $8,889
Depreciation charged in 2018 = $19,500
Answer:
a. Non- Current Asset
b. Depreciation Charge = $8,000
Explanation:
Straight Line method charges the same amount of depreciation on the asset over its useful life.
Depreciation Charge = (Cost - Salvage Value)/ Number of Useful Life
= ($95,000- $15,000) / 10
= $8,000
The Common Stock account for Baltimore Corporation on January 1, 2018 was $70,000. On July 1, 2018 Baltimore issued an additional 7,500 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $20,000 on January 1 and $40,000 on July 2 and net income was $111,000. Use this information to determine for December 31, 2018 the amount of Earnings per Share (rounded to the nearest cent).
Answer:
$6.25 per share
Explanation:
Basic Earning per share is calculated dividing Earning for the year excluding preferred dividend by weighted average number of shares.
Weighted average number of shares are used to calculate the basic earning per share.
January 1,
Numbers of share = $70,000 / $5 = 14,000 share
July 1,
Numbers of share = 14,000 share + 7,500 shares = 21,500 shares
Weighted Average Number of Shares = ( 14,000 x 6/12 ) + ( 21,500 x 6/12 )
Weighted Average Number of Shares = 7,000 shares + 10,750 shares
Weighted Average Number of Shares = 17,750 shares
Earning per share = Net Income / Weighted average numbers of shares
EPS = $111,000 / 17,750 shares = $6.25 per share
Final answer:
To determine the earnings per share for Baltimore Corporation on December 31, 2018, calculate the weighted average number of outstanding shares and divide the net income by this number. The earnings per share is $1.50.
Explanation:
To determine the earnings per share for Baltimore Corporation on December 31, 2018, we need to calculate the weighted average number of outstanding shares and divide the net income by this number.
First, let's calculate the weighted average number of outstanding shares. On January 1, the company had 70,000 shares. On July 1, an additional 7,500 shares were issued, resulting in a total of 77,500 shares. However, we need to account for the time period each set of shares was outstanding.
From January 1 to July 1, 70,000 shares were outstanding for 6 months. From July 1 to December 31, 77,500 shares were outstanding for 6 months. Using the weighted average formula: (70,000 x 6 + 77,500 x 6) / 12 = 73,750 shares.
Next, we divide the net income of $111,000 by the weighted average number of shares: $111,000 / 73,750 = $1.50 earnings per share.
a. The aggregate expenditures model states that savings and that savings will increase when disposable income or real GDP .
b. Which of the following concepts illustrates how much savings will change when disposable income or real GDP increases by $1?
- Marginal propensity to save (MPS)
- Autonomous consumption
- Disposable savings
- Marginal propensity to consume (MPC)
Answer:
(a) Either positive or negative; Increases
(b) Marginal propensity to save (MPS)
Explanation:
(a) We know that savings is directly related to the income level of the consumers. Savings may be positive or negative as it is dependent upon the level of disposable income. This means that an increase in the disposable income or Real GDP will lead to more savings.
(b) Marginal propensity to save refers to the proportion of the income (Disposable) that is saved by the consumer rather than spending for consumption of goods and services. It is defined as the extra amount of income that is saved by the household or consumer.
Calculate the unemployment rate and the labor force participation rate in the following case: Unemployed, 10 million; adult population, 200 million; employed, 90 million. The unemployment rate is 5%, and the labor force participation rate is 55%. The unemployment rate is 5%, and the labor force participation rate is 10%. The unemployment rate is 10%, and the labor force participation rate is 50%. The unemployment rate is 50%, and the labor force participation rate is 10%.
The unemployment rate is calculated as the ratio of unemployed individuals to the total labor force, which in this case is 10%. The labor force participation rate is calculated as the ratio of the total labor force to the total adult population, which is 50% in this case.
To calculate the unemployment rate and the labor force participation rate, we need to understand these terms. The unemployment rate is the percentage of the labor force that is jobless and actively seeking employment. The labor force participation rate is the percent of the adult population that is either employed or actively looking for work.
In this case, the labor force is the sum of the unemployed (10 million) and the employed (90 million), which totals to 100 million. Hence, the unemployment rate is the unemployed (10 million) divided by the labor force (100 million). So, the unemployment rate is 10%.
Similarly, the labor force participation rate is calculated by dividing the labor force (100 million) by the adult population (200 million), resulting in a labor force participation rate of 50%.
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Final answer:
The unemployment rate is calculated as 10% and the labor force participation rate is 50% in the given scenario.
Explanation:
To calculate the unemployment rate and the labor force participation rate, we will use the following definitions and formulas:
The labor force is the sum of employed and unemployed individuals.The adult population includes everyone who is of working age, employed or otherwise.The unemployment rate is the number of unemployed individuals divided by the labor force, multiplied by 100 to get the percentage.The labor force participation rate is the labor force divided by the adult population, multiplied by 100 to convert to a percentage.
In this scenario, we have:
Unemployed: 10 millionAdult population: 200 millionEmployed: 90 millionFirst, let's calculate the labor force:
Labor force = employed + unemployed = 90 million + 10 million = 100 millionNext, we calculate the unemployment rate:
Unemployment rate = (unemployed / labor force) × 100 = (10 million / 100 million) × 100 = 10%Finally, we determine the labor force participation rate:
Labor force participation rate = (labor force / adult population) × 100 = (100 million / 200 million) × 100 = 50%The correct answers are: the unemployment rate is 10%, and the labor force participation rate is 50%.
Sarah’s Organic Soap Company makes organic liquid soap. One of the raw materials for her soaps is organic palm oil. She needs 900 kg of palm oil per day on average. The supplier charges a $57 delivery fee per order (which is independent of the order size) and $5.25 per kg. Sarah’s annual holding cost is 20 percent. Assume she operates and sells five days per week, 52 weeks per year.
Answer:
$1905
Explanation:
Here we will have to calculate Economic Order Quantity to lower the ordering ordering and holding cost as much as we can. So here we will use the following formula to calculate the best number of units that we should order, which is as under:
Economic Order Quantity = SquareRoot (2 * Annual Demand * ordering cost per order / Holding cost per unit per year)
Here
Annual Demand = 900kg of palm oil per day * 52 weeks * 5 day a week / 7
Annual Demand = 900 * 52 * 5 / 7 = 33,429
And
Ordering cost per order = $57 per order
Annual holding cost per unit per year is 20% of $5.25 per kg which is $1.05.
So by putting values, we have:
Economic Order Quantity = Square Root (2 * 33,429 * 57 / 1.05)
Economic Order Quantity = 1905 kgs
5,126, 6,275, 0.026, 9,501
(
(a)
Q* = squareroot((2 x K x R)/h)
K = $60 per order
R = (1,000 x (5 x 52)) = 260,000 per year
h = ($4.75 x .25) = 1.1875 per year
Q* = squareroot((2 x $60 x 260,000)/1.1875)
= squareroot(31,200,000/1.1875)
= squareroot(26,273,684.21)
= 5,125.786204 kgs
(b)
C(Q) = (K x (R/Q)) + ((1/2) x h x Q)
K = $60 per order
R = 260,000 per year
Q = 4,000
h = 1.1875 per year
C(Q=4,000) = ($60 x (260,000/4,000) + ((1/2) x $1.1875 x 4,000)
= $3,900 + $2,375
= $6,275
(c)
C(Q) = (K x (R/Q)) + ((1/2) x h x Q)
K = $60 per order
R = 260,000 per year
Q = 8,000
h = 1.1875 per year
C(Q=8,000) = ($60 x (260,000/8,000)) + ((1/2) x $1.1875 x 8,000)
= $1,950 + $4,750
= $6,700
$6,700/260,000 = $0.025769231
(d)
C(Q) = (K x (R/Q)) + ((1/2) x h x Q)
K = $60 per order
R = 260,000 per year
Q = 15,000 per order
h = ($4.75 - ($4.75 x 0.05)) x 0.25 = 1.128125
C(Q=15,000) = ($60 x (260,000/15,000)) + ((1/2) x 1.128125 x 15,000)
= $1,040 + $8,460.9375
= $9,500.9375
)