Answer:
$201,805.67
Explanation:
The formula for calculating future value = A (B / r)
B = [(1 + r)^n] - 1
A = amount
R = interest rate = 8.5 / 2 = 4.25%
N = number of years = 12 x 2 = 24
(1.0425^24 - 1 ) / 0.0425 = 40.361134
40.361134 x $5,000 = $201,805.67
On November 1, 2016, a $216,000, 9-month, noninterest-bearing note is issued at a 10% discount rate.
Required:
1. Determine the effective interest rate.
2. Prepare the appropriate journal entry on December 31, 2016, to record interest on the note for the 2016 financial statements.
3. Prepare the appropriate journal entry(s) on July 31, 2017, to record interest and the payment of the note.
4. Prepare the appropriate journal entry to record the issuance of the note
Answer:
1) effective interest rate (for the 9 months period)= (1 + 10%/12)⁹ - 1 = 1.07754 -1 = 0.07754 = 7.75%
2) accrued interest = ($15,545/9) x 2 = $3,454.44 = $3,454
December 31, 2016, accrued interest on non-interest bearing note
Dr Discount on notes receivable 3,454
Cr Interest revenue 3,454
3) July 31, 2017, collection of non-interest bearing note receivable
Dr Cash 216,000
Dr Discount on notes receivable 12,091
Cr Notes receivable 216,000
Cr Interest revenue 12,091
4) November 1, 2016, non-interest bearing note receivable issued [I will assume that the note receivable was made for a sales operation (if it was made for a loan, you can just change sales revenue for cash)]
Dr Notes receivable 216,000
Cr Sales revenue / cash 200,455
Cr Discount on notes receivable 15,545
Explanation:
we have to first calculate the present value of the note using the 10% discount rate:
PV = $216,000 / (1 + 10%/12)⁹ = $216,000 / (1 + 0.8333%)⁹ = $200,454.88 = $200,455
The legal environment for public employees differs from private sector employment because public employees:
Answer: d. all of the above
Explanation:
Public employees are generally more protected than private employees. As they fall under the Civil Service, they are protected by civil service laws which require more care for employees than in private employ where employees are less protected.
Government employees employees are also protected by the various constitutional rights bestowed on them. Even though private employees have constitutional rights as well, it is harder to enforce them in private employ than it is in Government employ.
Public employees also enjoy a property interest in their job which means that generally, they cannot be fired without being given a chance to defend themselves especially when they can prove a legitimate entitlement claim. This is in contrast to private employees that can be fired at will.
you've observed the following returns on crash-n-Burn computers stock over the past five years: 17 percent, -4 percent, 20 percent, 12 percent, and 10 percent. a) what was the arithmetic average return on the company's stock over this five year periods?
Answer: 11%
Explanation:
Arithemetic mean is the average of a set of numeric variables that is calculated by adding them up and dividing by the number of variables there are.
= (0.17 + (-0.04) + 0.2 + 0.12 + 0.10)/5
= 0.55/5
= 0.11
= 11%
Martin Buber Co. purchased land as a factory site for $400,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months.
The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Martin Buber paid $2,200 to an engineering firm for a land survey, and $68,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor's charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction.
Instructions
Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buber Co. Assume that the land survey was for the building
Answer:
Cost of land is $439,050.
Cost of the building is $2,981,100.
Explanation:
Computation of Cost of the Land
Particular Amount
Land $400,000
Add: Razing $42,000
Add: Legal fees $1,850
Add: Insurance $1,500
Add: Salvage $6,300
Cost of the land $439,050
Hence, the cost of land is $439,050.
Computation of Cost of the Building
Particular Amount
Survey $2,200
Add: Drawing the factory plan $68,000
Add: Liability insurance premium $900
paid during construction
Add: Contractor's charge for constr. $2,740,000
Add: Interest cost $170,000
Cost of the building $2,981,100
Hence the Cost of the building is $2,981,100.
The cost of the land and the cost of the building that should be recorded on the books of Martin Buber Co. is: $439,050; $2,981,000.
a. Cost of the Land
Land $400,000
Cost of Razing $35,700
($42,000-$6,300)
Legal fees $1,850
Insurance $1,500
Total cost of land $439,050
b. Cost of Building
Drawing the factory plan $68,000
Survey $2,200
Liability insurance premium $900
Cost of Contraction $2,740,000
Interest cost $170,000
Total cost of the building $2,981,100
Inconclusion the cost of the land and the cost of the building that should be recorded on the books of Martin Buber Co. is: $439,050; $2,981,000.
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Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market's required rate of return is 13.25%, the risk-free rate is 7.00%, and the Fund's assets are as follows:________ Stock Investment Beta A. $ 200,000 1.50 B. $ 300,000 -0.50 C. $ 500,000 1.25 D. $1,000,000 1.75
Answer:
r Portfolio = 0.1489 or 14.89%
Explanation:
To calculate the required rate of return of Global Investment Fund's portfolio, we first need to determine the return on Market (rM) using the CAPM equation for required rate of return.
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rateWe already know the required rate of return for the market and the risk free rate. The beta for market is always 1. SO, the return on market is also 13.25% because at a beta of 1, the return on market and the required rate of return on market is same.
Now we need to calculate the required rate of return of each stock and then calculate the weighted average of the required rate of returns of each stock to calculate the required rate of return for the Global Investment Fund.
r A = 0.07 + 1.5 * (0.1325 - 0.07)
r A = 0.16375 or 16.375%
r B = 0.07 + (0.1325 - 0.07) * -0.5
r B = 0.03875 or 3.875%
r C = 0.07 + 1.25 * (0.1325 - 0.07)
r C = 0.148125 or 14.8125%
r D = 0.07 + 1.75 * (0.1325 - 0.07)
r D = 0.179375 or 17.9375%
Total investment in GIF = 200000 + 300000 + 500000 + 1000000
Total investment in GIF =2000000
required rate of return of Global Investment Fund (GIF) is,
r Portfolio = 0.16375 * 200000/2000000 + 0.03875 * 300000/2000000 +
0.148125 * 500000/2000000 + 0.179375 * 1000000/2000000
r Portfolio = 0.1489 or 14.89%
"On June 12th, a customer buys 100 shares of DEF stock at $49 per share. On June 30th of the same year, the customer sells the stock at $39. On July 10th of the same year, the customer buys DEF stock at $42. The customer's cost basis in DEF stock is:"
Answer:
The customer's cost basis in DEF stock is:
$4,900
Explanation:
The stock price = $49 per share
Number of shares = 100
The value on June 12 = $4,900 ($49 x 199)
The DEF stock cost basis is the amount which is initially paid for the purchase of the 100. When the DEF stock is sold, the tax liability is determined by how much is spent to buy the security (cost basis) and the sales price. Since the security is sold at a price lower than the original purchase price, the difference is not taxable as a capital gain.
BR Company has a contribution margin of 8%. Sales are $497,000, net operating income is $39,760, and average operating assets are $135,000. What is the company's return on investment (ROI)?
Answer:
The company's return on investment (ROI) is 29.45%.
Explanation:
Return on investment (ROI) is a profitability ratio that gives investors the opportunity to know the level of efficiency of each amount of dollar invested in a project at producing a profit.
Return on investment (ROI) can be computed using the following formula:
ROI = Net operating income / Average operating assets ............ (1)
Since;
Net operating income = $39,760
Average operating assets = $135,000
We therefore substitute the values into equation (1) and have:
ROI = $39,760 / $135,000 = 0.2945, or 29.45%
Therefore, the company's return on investment (ROI) is 29.45%.
Systems builders and Customers have a high level of responsibility and should take great care to ensure that any investment in new Solutions will deliver what benefit?
Answer:
Systems builders and Customers have a high level of responsibility and should take great care to ensure that any investment in new Solutions will deliver shared economic benefits.
Explanation:
The purpose of the interaction between the organization, represented here by systems builders, and the customers is to increase shared value. This is why in building any customer solution, the organization must exercise responsibility to limit the use of resources so that when new solutions are offered to solve customers' problems, the outcome of the effort yields benefits that the customers will be willing to pay for. It is when this is achieved that system builders can beat their chests that they have created value that satisfies customers.
Systems builders and customers are highly responsible and must carefully ensure that all investments in new solutions bring common economic benefits:
The purpose of the interaction between the organization and the customer, represented here by the system builder is to increase shared value. Therefore, when developing a customer solution, the organization must be responsible for limiting the use of resources. By doing so, the effort results in a profit that the customer is willing to pay when a new solution is offered to solve the customer's problem.Learn more :
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If you were reviewing an Airline company such as American Airlines Group Inc, which of the following metrics is most relevant? (2 points)
A) Barrel of Oil Equivalent (BOE)
B) Revenue Passenger Miles (RPM)
C) Average Revenue per User (ARPU)
D) Same Store Sales (SSS)
Answer:
B) Revenue Passenger Miles (RPM)
Explanation:
Revenue passenger miles are the most relevant metrics i.e. used for transportation. It reflects how many numbers of miles it traveled by a particular passenger. It considered the efficiency and the profitability earned by the company based on the number of passengers. The payment could depend on the number of miles chosen by the passenger
So in the given situation, option B is most relevant and hence it is the right answer
Consider the following data set:
Month Actual Sales Forecast 1 Forecast 2
1 777 771 769
2 789 785 787
3 794 790 792
4 780 784 798
5 768 770 774
6 779 768 770
7 760 761 759
8 785 771 775
9 786 784 788
10 791 788 788
a. Calculate MAD and MSE for each forecast (forecast 1 and forecast 2).
b. Calculate MAPE for each forecast (forecast 1 and forecast 2).
Answer:
Kindly check explanation
Explanation:
To obtain the mean absolute deviation(MAD) :
Subtract the forecasted values from the actual values and find its absolute equivalent.
Error (E) = (Actual - forecast)
e1 - - - |e1| - - - - e2 - - - |e2| - APE1 - - APE2
6 - - - - 6 - - - - - 8 - - - - 8 - - 0.772 - - - 1.030
4 - - - - 4 - - - - - 2 - - - - 2 - - 0.507 - - 0.253
4 - - - - 4 - - - - - 2 - - - - 2 - - 0.504 - - 0.252
(-4) - - - 4 - - - - - (-18) - - 18 - 0.513 - - 2.308
(-2) - - - 2 - - - - (-6) - - - 6 - - 0.260 - - 0.781
11 - - - - 11 - - - - 9 - - - - 9 - - 1.412 - - - 1.155
(-1) - - - 1 - - - - - 1 - - - - 1 - - - 0.132 - - 0.132
14 - - - 14 - - - - 10 - - - 10 - - 1.783 - - 1.274
2 - - - - 2 - - - - (-2) - - 2 - - - 0.254 - - 0.254
3 - - - - 3 - - - - - 3 - - - 3 - - 0.379 - - - 0.379
MAD for forecast 1:
(Sum of |e1|) / number of observation
(6 + 4 + 4 + 4 + 2 + 11 + 1 + 14 + 2 + 3) / 10
= 51 / 10
= 5.1
MAD for forecast 2:
(Sum of |e2|) / number of observation
(8 + 2 + 2 + 18 + 6 + 9 + 1 + 10 + 2 + 3) / 10
61 / 10
= 6.1
MAPE = (Sum of absolute percentage error) / number of observations
Forecast 1:
(0.772 + 0.507 + 0.504 + 0.513 + 0.260 + 1.412 + 0.132 + 1.783 + 0.254 + 0.379)% / 10
= 6.516% / 10 = 0.6516%
MAPE Forecast 2:
(1.030 + 0.253 + 0.252 + 2.308 + 0.781 + 1.155 + 0.132 + 1.274 + 0.254 + 0.379)% / 10
= 7.818% / 10
= 0.7818%
Remedies available to a trademark owner whose trademark has been infringed by counterfeit goods include all of the
following except__.
O lost profits
O treble damages
O an Injunction
O no damages, If the act was unintentional
OPTION D) NO DAMAGES, IF THE ACT WAS UNINTENTIONAL.
Explanation:
HOPE IT HELP....❤❤Answer:no damages, If the act was unintentional
Explanation:
Electronic filing (e-filing): a. Reduces the chances that the IRS will make mistakes when inputting tax return information. b. Requires the services of a professional. c. Generally results in a slower refund. d. Can be done only by telephone.
Answer:
a. Reduces the chances that the IRS will make mistakes when inputting tax return information.
Explanation:
Electronic filing simply has to do with the storage of business data on a computer system. It is way safer than filing on paper because these files can be stored and they have backup systems for them too. These systems gives a way of managing such files by organizing, updating, storing and retrieving the files whenever it is necessary.
Option a is the best answer for This question as it points out one of the many advantages of such a system.
An asset has had an arithmetic return of 10.3 percent and a geometric return of 8.3 percent over the last 90 years. What return would you estimate for this asset over the next 10 years? 25 years? 30 years?
Answer:
Blume's formula combines the geometric and arithmetic means of an asset to be able to predict its returns in a given period.
The formula is;
= Geometric Mean*(T-1)/(N-1) + Arithmatic Mean *(N-T)/(N-1)
Where;
T = Period in question
N = Total period
10 years
= 8.3%*(10-1)/(90-1) + 10.3%*(90-10)/(90-1)
= 10.1 %
25 years
= 8.3%*(25-1)/(90-1) + 10.3%*(90-25)/(90-1)
= 9.76%
30 years
= 8.3%*(30-1)/(90-1) + 10.3%*(90-30)/(90-1)
= 9.65%
According to the following data,
2000
2019
Average hourly wage
$14
$23
CPI
170
254
a. by what percentage did nominal wages increase between 2000 and 2019?
b. by what percentage did consumer prices increase between 2000 and 2019?
c. Did real wages increase between 2000 and 2019?
Answer:
A.Nominal wages will increase by 64%
B.Consumer prices will increase by 49.41%
C.Real wages will increase by 14.85%
Explanation:
The computations are shown below:
a. Computation for what percentage did nominal wages increase between 2000 and 2019
Using this formula
Nominal wages = (Average hourly wage 2019-Average hourly wage 2000)÷Average hourly wage 2000
Let plug in the formula
Nominal wages($23 - $14) / ($14)
Nominal wages= ($9) / ($14)
Nominal wages= 64%
Therefore Nominal wages will increase by 64%
b. Computation for what percentage did consumer prices increase between 2000 and 2019
Using this formula
Consumer prices=(CPI 2019-CPI 2000)÷CPI 2000
Let plug in the formula
Consumer prices= (254 - 170) / (170
Consumer prices= (84) / (170)
Consumer prices= 49.41%
Therefore Consumer prices will increase by 49.41%
c. Computation for real wages increase between 2000 and 2019
Real wages increase= ($14 × 254) / (170)
Real wages increase= $20.92
Real wages increase= $23 - $20.92
Real wages increase= $2.08
Real wages increase= ($2.08 / $14) × 100
Real wages increase= 14.85%
Therefore the Real wages will increase by 14.85%
Answer:
Poop
Explanation:
Residents of a South American country are not allowed to convert their currency into other currencies. However, all foreign businesses with deposits in banks there may, at any time, convert all their currency into foreign currency and take it out of the country. The currency in this country is
Answer: Externally Convertible.
Explanation:
Externally convertible currencies are those currencies which have such a heavy restriction on their trade that the country's own residents are forbidden to convert it into foreign currency.
In a bid to allow some sort of investment however, the Government will allow non-residents such as foreign businesses to convert currency so as to be able to freely conduct their businesses without fear of being unable to gain adequate returns.
4 majors that require at least 2 accounting courses:
Answer:
Business Administration and in general, all business degrees require at least two accounting courses, often even more, since accounting is such an important part in any business.
Finance is another degree that requires at least 2 accounting courses (likely more). Finance is closely linked to accounting, because finance is often dedicated to the study of aggregate accounting variables like those appearing in financial statements.
Economics is a degree that often requires at least 2 accounting courses, including a course in public accounting. It is important for economists to understand the accounting reality of governments and organizations.
Finally, International relations is a degree that often includes accounting courses as well.
Hobart Industries is trying to estimate its first-year operating cash flow (at t = 1) for a proposed project. The financial staff has collected the following Information:
Projected sales $3,000,000
Operating costs 1,200,000
Depreciation 450,000
Interest expense 330,000
The company faces a 40% tax rate, what is the project's operating cash flow for the first year (t -1)?
a. $810,000.
b. $1,080,000.
c. $1,500,000.
d. $1,800,000.
e. $1,260,000.
Answer:
e. $1,260,000
Explanation:
The project's operating cash flow is calculated below;
Projected sales $3,000,000
Less: operating cost ($1,200,000)
Less: depreciation ($450,000)
Operating income before taxes
$1,350,000
Less: 40% taxes ($540,000)
Operating income after taxes.
$810,000
Add: back depreciation $450,000
Operating cash flow $1,260,000
What new and innovative mechanisms, laws, or practices could corporate America put in place to address the corporate misconduct that we often find in the news
Answer:
enact stringent laws against tax evasion.
Explanation:
One common misconduct among corporations today involves avoiding taxes (tax evasion), despite the efforts of government in prosecuting offenders more cases are reported.
By enacting laws with maximum punishment for offenders, this may scare off attempts to evade taxes.
If the economy is normal, Matthews, Inc. stock is expected to return 14.3 percent. If the economy falls into a recession, the stock's return is projected at a negative 8.7 percent. The probability of a normal economy is 80 percent. What is the variance of the returns on this stock
Answer:
Variance =0.008464
Explanation:
The probability that there will be recession = 100 – 80 = 20%
Therefore expected return = Return × probability
=(0.8 × 14.3) + (0.2 × -8.7)
= 9.7%
Total probability is calculated in the table (use the attached table)
Standard deviation (SD) = [Total probability (84.64%) × (Return (8.7%) - Expected Return (14.3%))^2 / Total probability (84.64%) ]^(1/2)
=9.2%
Thus, variance = (SD)^2
variance =0.008464
Up...
Which marketing function has the most physical contact with customers?
Your answer:
O selling
o product management
O pricing
o promotion
Clear answer
Answer:
Selling.
Explanation:
The marketing function that has the most physical contact with the seller is selling, because most sales happen one on one between customer and seller.
Other aspects like promotion and product management has considerable physical contact with customers, but the most contact is with selling.
A bond pays 7% annual interest in semi-annual payments for 10 years. The current yield on similar bonds is 9%. To determine the market value of this bond, you must
Answer:
A bond pays 7% annual interest in semi-annual payments for 10 years. The current yield on similar bonds is 9%. To determine the market value of this bond, you must determine the market issuance price of the said bond.
Explanation:
Issuance price of a bond is based on the relationship between the interest rate that the bond pays and the market interest rate being paid on the same date.
promissory note received from a customer in exchange for an account receivable is recorded by the payee as
Answer: Note Receivable
Explanation:
A Note Receivable is a written document from a party promising to repay another party with interest on amounts borrowed in form of cash or otherwise thereby creating a debtor - creditor relationship between them.
When a promissory note is received from a customer in exchange for an accounts receivable it is a Note Receivable and the Payee being the creditor will record it as such.
Expenses incurred but not yet paid or recorded are called:_______. a) prepaid expenses. b) accrued expenses. c) interim expenses. d) unearned expenses.
Answer:
they are called accrued expenses.
The CVP income statements shown below are available for Armstrong Company and Contador Company. Armstrong Co. Contador Co. Sales $495,000 $495,000 Variable costs 235,000 48,000 Contribution margin 260,000 447,000 Fixed costs 160,000 347,000 Net income $100,000 $100,000 (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) Degree of Operating Leverage Armstrong Contador (b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company.
Answer:
a. Degree of Operating Leverage = Contribution Margin / Net Income
Armstrong Company = 260,000 / 100,000 = 2.6
Contador Company = 447,000 / 100,000 = 4.47
b. Armstrong Contador
Sales revenue 544,500 544,500
Variable costs 258,500 52,800
Contribution margin 286,000 491,700
Fixed Costs 160,000 347,000
Net Income $126,000 $144,700
Calculation of Sales revenue increase by 10%
495,000 * 1.10 = 544,500
235,000 * 1.10 = 258,500
48,000 * 1.10 = 52,800
The typical age-earnings cycle shows that:
a. there is a positive relationship between age and earnings that eventually turns into a negative relationship.
b. there is a constant positive relationship between age and earnings.
c. there is a constant negative relationship between age and earnings.
d. there is no relationship between age and earnings.
Answer:
A. there is a positive relationship between age and earnings that eventually turns into a negative relationship
Explanation:
The earning cycle is earning profile of a person at a period of their lifetime
This cycle usually starts with low earnings, but it starts to increase gradually to a period of age of around age 50, and then from this age it starts to fall.
From the question there is a positive relationship between age and earnings that eventually turns into a negative relationship
Which of the following five types of products is least likely to be produced in a process manufacturing system?
A. Compact disks.
B. Slacks for casual wear.
C. Baseball hats.
D. Calculators.
E. Oil paintings.
Answer:
E. Oil paintings.
Explanation:
Out of the answers provided the product that is least likely produced in a process manufacturing system would be oil paintings. That is because this system is a production method that creates goods by combining supplies, ingredients or raw materials using a formula or recipe. Oil paintings on the other hand are mainly created by a single individual through a unique creative process that tends to change depending on the painting itself and does not have a set recipe.
interest is eligible to be capitalized as part of an assets cost rather than being expensed immediately when:
Answer:
d. All of these answer choices are correct.
Explanation:
Capitalization of interest rates is not always appropriate. The ideal situation to do so is whenever an asset needs major investment and long construction time, thus generating a considerable amount of interest costs.
Moreover, if there are huge extra accounting and administrative costs associated with capitalizing interest costs, and the advantage of the extra information is relatively low, you do not need to capitalize it.
So the all given options are fulfilled
Hence, the correct option is d.
Important reasons for a company to consider industry or region diversification include A. A desire to avoid putting all of its "eggs" in one industry or region basket, dimming growth opportunities in its present business, and opportunities to transfer its resources, expertise, and capabilities to other industries and regions. B. A need to soak up excess resources and avoid the temptation to allocate unneeded resources to the company’s various internal functional area activities. C. The benefits of giving company managers the opportunity to develop first-hand knowledge of other businesses, customers, technologies, and industry environments. D. Giving the company a broader base to pursue product innovation. E. Reducing the need to use price cuts to grow the company’s profits and return on investment in its main line of business.
Answer:
A. A desire to avoid putting all of its "eggs" in one industry or region basket, dimming growth opportunities in its present business, and opportunities to transfer its resources, expertise, and capabilities to other industries and regions.
Explanation:
The ability to transfer knowledge, and resources to other sectors is one of the reasons why diversification happens.
Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 7,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $ 3.70 Direct labor $ 3.60 Variable overhead $ 1.40 Supervisor's salary $ 4.00 Depreciation of special equipment $ 3.90 Allocated general overhead $ 4.10 An outside supplier has offered to produce and sell the part to the company for $17.10 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part U98 from the outside supplier rather than to continue making the part, what would be the annual financial advantage (disadvantage)?
Answer: Financial disadvantage of -$30,800
Explanation:
If purchased externally then the equipment used in production will no longer be used therefore its depreciation would be irrelevant to the unit.
The fixed costs would be incurred regardless so will not factor in the decision either.
Therefore the total relevant cost of producing internally is;
= (Direct materials + Direct labor + Variable overhead + Supervisor's salary) * Units produced
= (3.7 + 3.6 + 1.4 + 4) * 7,000
= 12.7 * 7,000
= $88,900
If Part U98 is purchased from outside at $17.10 a unit;
= 7,000 * 17.10
= $119,700
Total Financial advantage (disadvantage)
= Variable cost and supervisor salary - Cost of purchasing outside
= 88,900 - 119,700
= -$30,800
= (30,800)
Ned's Natural Foods sells unshelled peanuts by the pound. Historically, Ned has observed that daily demand is normally distributed with a mean of 80 pounds and a standard deviation of 10 pounds. Lead time also appears normally distributed with a mean of eight days and a standard deviation of one day. What ROP would provide a stockout risk of 10 percent during lead time?
Answer: 749 units
Explanation:
The formula for the Re-Order Point is;
ROP = d(LT) + z√( LTσd²+ d² σLT²)
Where,
d is demand
LT is lead time
σd is standard deviation of daily demand
σLT is standard deviation of lead time
As the stockout risk is to be 10%, z will be a service level of 90% which is ±1.28
ROP = 80(10) + 1.28√( 8(10)²+ 80² * 1²)
= 800 + 1.28√( 800 + 6400)
= 748.61
= 749 units