Answer and Explanation:
The journal entries are shown below:
Sales Revenue $492,000
Interest Revenue $6,000
Gains on Sale of Investment $8,000
To Profit or Loss $506.000
(being the closing of revenue accounts is recorded)
Profit or Loss $440,000
To Salaries Expense $80,000
To Advertising Expense $10,000
To Cost of Goods Sold $284,000
To Insurance Expense $12,000
To Interest Expense $4,000
To Income Tax Expense $30,000
To Depreciation Expense $20,000
(being the closing of expenses accounts is recorded)
Net Income $66,000 ($506,000 - $440,000)
To Profit or Loss $66,000
(being Recording of profit earned)
Besides not being required, why do you think a company would choose to report or not report a gross profit line? Why do you think many service companies in particular do not report a gross profit line?
Answer:
Gross profit = net sales revenue - cost of goods sold. But what happens when your company doesn't sell any goods, specially if they only sell services and it is impossible to determine the COGS.
This is basically an accounting issue since the IRS defines COGS as:
The cost of products or raw materials, including freight Storage Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products Factory overhead the cost of inventory items soldSo if your company doesn't sell any items from inventory, the IRS will not consider that your company incurred in COGS.
Reporting COGS is very useful for deducting business expenses, but it is not mandatory. Also, any expenses deducted as COGS cannot be deducted again as any other type of cost. So it is simply an accounting practice that helps certain industries to report their business expenses more clearly and in an orderly manner. But if it is too complicated to determine your company's COGS, then you can report your expenses in other ways and reduce your problems.
Gross profit is computed by subtracting the cost of goods sold (COGS) from revenue on a company's income statement (sales). What happens if your company doesn't sell any things, especially if it just sells services, and determining the COGS is impossible.
This is mostly an accounting issue, as COGS is defined by the IRS as:
Storage costs, as well as the cost of products or raw materials.
Workers' direct labor costs (including contributions to pension or annuity plans).
The cost of inventory products sold plus factory overhead.
As a result, if your company does not sell any inventory, the IRS will not consider your company to have incurred COGS.
COGS reporting is beneficial for deducting business expenses, although it is not required. Furthermore, any COGS charges cannot be deductible as any other form of cost. As a result, it is only an accounting method that assists some sectors in reporting their business expenses in a more clear and organized manner.
For more information about gross profit line refer to the link:
https://brainly.com/question/15291292
Suppose instead that an emissions tax is placed directly on consumers. Under what conditions will producers also bear some of the burden of this tax
Answer:
Emissions Tax on consumers:
Assuming that the demand for the product under which the emissions tax is placed directly on consumers is elastic, then producers will also bear some of the burden of this tax in lost sales. Warehouse costs will skyrocket as consumers literally boycott the products and producers are forced to stop further production. These have far-reaching implications.
Explanation:
By placing the burden on consumers directly, consumers will spend more for the same quantity of goods, if there are no substitutes. Such tax is usually levied to discourage consumption of certain goods.
During January, Ajax Co. incurs 1,850 hours of direct labor at an hourly cost of S11 output is t 100 units of its finished product. Ajax standard labor cost per unitor (2 hours x $11.00). Instructions
Compute the total, price, and quantity labor variances for Ajax Co. for January.
Answer and Explanation:
The computation is shown below:
For the labor price variance
= Actual Hours × (Actual rate - standard rate)
= 1,850 × ($11.80 per hour - $11 per hour) ,
= 1.850 × $0.80 per hour
= $1,480 unfavorable
For labor quantity variance
= Standard Rate × (Actual hours - Standard hours)
= $11 × (1,850 hours - 2,000 hours)
= $11 per hour × - 150hours
= $1,650 favorable
Now total would be
= Labor price variance + labor quantity variance
= $1,480 unfavorable + 1,650 favorable
= $170 favorable
Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.5 percent. The bond sells for $955.25 and matures in 19 years. The par value is $1,000. What is the YTM of the bond
Answer:
5.89%
Explanation:
The computation of the yield to maturity could be find out by determining by applying the RATE formula i.e. to be shown in the attachment
Provided that,
Present value = $955.25
Future value or Face value = $1,000
PMT = 1,000 × 5.5% ÷ 2 = $27.50
NPER = 19 years × 2 = 38 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula , the YTM is
= 2.9473% × 2
= 5.89%
Aidan was just hired to work for a federal agency in the procurement department. Aidan shops for the best buys possible and finds a great deal. Aidan returns to the office and informs the supervisor about this discovery. Aidan’s boss tells him to be sure that the Buy American Act is satisfied. What does Aidan find when researching this law?
Answer:
he found out that unless the price is a certain percentage that is higher than the price of the equivalent foreign product, federal agencies must buy products with at least 50% of the components made in the U.S.A.
Explanation:
Your client purchases 100 shares of XYZ common stock at $50 and sells two XYZ Oct 55 calls for a premium of $2 each. This investor's maximum potential loss is
Answer: Unlimited
Explanation:
The client has 100 shares in XYZ which means that the first call is covered by this stock should the price of the stock increase and the buyer exercises the option. However, the second call is not completely covered by the shares that the client owns.
This is called an uncovered call and in theory, the losses that the client could get is unlimited because the XYZ stock value could rise forever.
An investor buys a call at a price of $6.30 with an exercise price of $58. At what stock price will the investor break even on the purchase of the call?
Answer:
Break even price = $64.3
Explanation:
To get the break even price, we simply add up the call price with the exercise price
Call price = $6.3
Exercise price = $58
Break even price = $6.3 + $58 = $64.3
Bill Padley expects to invest $25,000 for 3 years, after which he wants to receive $32,375.00. What rate of interest must Padley earn?
Answer:
8.99%
Explanation:
The formula to calculate the rate of interest is:
r=(FV/PV)^1/n - 1
r= rate of interest
FV= future value= $32,375
PV= present value= $25,000
n= number of period of time= 3
Now, you can replace the values in the formula:
r=(32,375/25,000)^1/3-1
r=1.295^1/3-1
r=0.0899→8.99%
According to this, the rate of interest that Padley must earn is 8.99%.
At Pharoah Electronics, it costs $33 per unit ($19 variable and $14 fixed) to make an MP3 player that normally sells for $55. A foreign wholesaler offers to buy 3,750 units at $28 each. Pharoah Electronics will incur special shipping costs of $1 per unit.
Required:
Assuming that Pharoah Electronics has excess operating capacity, indicate the net income (loss) Pharoah Electronics would realize by accepting the special order.
Answer:
Reject Order Accept order Net Income
Increase (Decrease)
Revenues = $0 $105,000 $105,000
(3750 units x $28)
Costs-Manufacturing = $0 -$71,250 -$71,250
(3750 units x $19 (VC) )
Shipping $0 -$3,750 -$3,750
(3750 units x $1)
Net Income $0 $30,000 $30,000
Pharoah Electronic would realize the net Income of $30,000 by accepting the special order. Hence, the special order should be accepted.
Tom, Kirk, and Steve are triplets. They all decide to borrow $1,000 today to go on vacation. They will repay their loans, plus all the accrued interest, in one lump sum exactly 1 year from today. Tom borrows his money at 6 percent simple interest. Kirk’s loan is based on 6 percent interest compounded monthly. Steve is charged 6 percent compounded annually. Who pays the most interest? How much more interest does he pay more than his brothers?
Which of the following would not be classified as a material particiapant in an activity?
A. Short-term capital gains.
B. Charitable contributions.
C. MACRS depreciation expense.
D. Guaranteed payments.
Answer:
C. MACRS depreciation expense.
Explanation:
Material participation in an income-producing activity. That is, an activity that is regular, continuous, and substantial leading to income-producing actions, in which the taxpayer materially participates is an active income or loss.
Teton Trails manufactures backpacks for adventurers. The backpacks come in two types: Daytripper, and Excursion. Teton anticipates the following production volumes:
Daytripper: 2,000 backpacks in July, 2,200 backpacks in August
Excursion: 1,200 backpacks in July, 900 backpacks in August
Teton’s policy is to maintain ending inventories at 5% of what is expected for the next month. What is the budgeted level of production in July for both styles?
A. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
B. 2,000 Daytripper backpacks and 1,200 Excursion backpacks.
C. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
D. 1,990 Daytripper backpacks and 1,215 Excursion backpacks.
Answer:
The production level of Daytripper will be 2010 backpacks and the production level of Excursion will be 1185 backpacks. Thus, option C is the correct answer.
Explanation:
The production volume in July can be calculated by adding the production for July and the closing inventory in July and deducting the opening inventory in July from it.
Production level = Closing Inventory + Production - Opening Inventory
Daytripper = (2200 * 0.05) + 2000 - (2000 * 0.05)
Daytripper = 2010
Excursion = (900 * 0.05) + 1200 - (1200 * 0.05)
Excursion = 1185
You want to buy a new sports car 3 years from now and you want to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5% annual compounding interest rate. How much will you have at the end of three years
Answer:
FV= $12,810
Explanation:
Giving the following information:
Annual deposit= $4,200
n= 3
i= 5% annual compounding
To calculate the future value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {4,200*[(1.05^2) - 1]}/0.05
FV= 8,610 + 4,200
FV= $12,810
Delaney takes out a $500,000 loan to open a new bar. He will repay the loan in 200 monthly installments, beginning 1 month from now. If he pays equal amounts of principal every month, what will be his third payment
Answer:
the question is incomplete, since you need an APR rate. I looked for similar question and the effective interest rate was 15%:
Delaney will pay $500,000 / 200 = $2,500 in principal every month.
His first payment will be = ($500,000 x 15% x 1/12) + $2,500 = $6,250 + $2,500 = $8,750His second payment will be = ($497,500 x 15% x 1/12) + $2,500 = $6,218.75 + $2,500 = $8,718.75His third payment will be = ($495,000 x 15% x 1/12) + $2,500 = $6,187.50 + $2,500 = $8,687.50Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $33 per pound and costs $28 per pound to produce. Product C would sell for $58 per pound and would require an additional cost of $25 per pound to produce. What is the differential cost of producing Product C?
Answer:
Differential cost of producing Product C = $0
Explanation:
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all cost incurred up to the split-off point (the cost of crushing) are irrelevant to the decision to process further .
$
Sales revenue after the split off point (Product C) 58
Sales revenue at the split-off point (Product B 33
Additional sales revenue per unit 25
Further processing cost (25)
Differential cost of Product C 0
Differential cost of producing Product C = $0
Note that the cost incurred up until the split off point was not included because it is Irrelevant to the decision to process further. It has already been incurred , hence it is a sunk cost
Money from an allowance or job is known as
Answer:
Earnings?
Explanation:
┐( ∵ )┌ because you earned it?
Occasionally, ________________ may lead to pure monopoly; in other market conditions, they may limit competition ______________________. *
Answer:
barriers to entry; to a few oligopoly firms.
Explanation:
Occasionally, barriers to entry may lead to pure monopoly; in other market conditions, they may limit competition to a few oligopoly firms.
Monopoly can be defined as a type of market in which there is a single seller of a unique product. This sellers typically do not face any competition from others.
This ultimately implies that, when there are barriers to entry it may result in monopolistic competition among the sellers of goods having no close substitutes. These barriers consist of economies of scale, network externalities, copyright law, trademark, patent, governmental policies etc.
How many dollars must you invest now at an APR of 4.6% with monthly compounding to have $8000 in six years? Round your answer to the nearest dollar.
Answer:
$6,073.853
Explanation:
For computing the amount invested now we need to determine the present value by applying the present value formula i.e. to be shown in the attachment
Provided that
Future value = $8,000
Rate of interest = 4.6% ÷ 12 months = 0.3833%
NPER = 6 years × 12 months = 72 months
PMT = $0
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the present value is $6,073.853
Which one of the following generic types of competitive strategy is typically the "best" strategy for a company to employ?
A. A low-cost leadership strategy
B. A broad and narrow differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost differentiation leadership provider strategy
E. One that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities
Answer: One that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities
Explanation:
The generic types of competitive strategy is typically the "best" strategy for a company to employ is one that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities.
This is because the company has to consider it's resources, the market and other necessary factors before making a decision on that.
If the price level increases by 0.2 percent for every $100 billion increase in the money supply, by how much might prices rise if the Fed increases total reserves by $80 billion and the reserve requirement is 0.05?
Answer:
Increase in price level = 3.2%
Explanation:
Given:
Price level increases = 0.2
Reserves = $80 billion
Reserve requirement =0.05?
Computation:
Increase in money = Increase in reserves / Reserve ratio
Increase in money = $80 billion / 0.05
Increase in money = 1,600
And
Increase in price level = (Increase in money / 100) x 0.2%
Increase in price level = (1,600 / 100) x 0.2%
Increase in price level = 3.2%
On September 1, 2003, Time Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to Unearned subscriptions revenue. What would be the required adjusting entry at December 31, 2003
Answer:
Total subscriptions revenue for the period= 4 months (September 1 - December 31)
= (600 * $81) * 4/12
= $48,600 * 4/12
= $16,200
Hence adjusting entry would be:
Deferred subscriptions revenue a/c Dr $16,200
To Subscriptions revenue Cr $16,200
Calculate the effective annual interest rate for the following: a. A 3-month T-bill selling at $97,645 with par value $100,000
Answer:
The effective annual rate is 10%
Explanation:
Future value = Present value * (1+r)^n
(1+r)^n = Future value / Present value
r = (Future value / Present value)^n - 1
Here r is the rate
Substitute the values as below
r = (Future value / Present value)^n - 1
r= ($100,000 / $97,654)^4 - 1
r = 1.10000 - 1
r = 0.10000
r = 10%
Cabell Products is a division of a major corporation. Last year the division had total sales of $10,400,000, net operating income of $540,800, and average operating assets of $2,392,000. The company's minimum required rate of return is 16%. The division's residual income is closest to:
Answer:
$158,080
Explanation:
The division's residual income is calculated as;
= Net operating income - ( Average operating assets × Minimum required rate of return)
= $540,800 - ( $2,392,000 × 16% )
= $540,800 - $382,720
= $158,080
Shelby Boat Wash's cost formula for its cleaning equipment and supplies is $2,940 per month plus $35 per boat. For the month of September, the company planned for activity of 73 boats, but the actual level of activity was 29 boats. The actual cleaning equipment and supplies for the month was $4,010. The activity variance for cleaning equipment and supplies in September would be closest to:
Answer:
$1,540
Explanation:
Calculation for the activity variance for cleaning equipment and supplies in September
First step is to calculate for theFlexible budget
Using this formula
Flexible budget =[Cleaning equipment and supplies +(Amount per boat ×Actual level of activity)
Let plug in the formula
Flexible budget =[$2,940 + ($35 × 29)]
Flexible budget =$2,940+$1,105
Flexible budget =$3,955
Second step is to calculate for the Planning budget using this is formula
Planning budget =[Cleaning equipment and supplies +(Amount per boat ×Planned activity ]
Let plug in the formula
Planning budget= [$2,940 + ($35 × 73)]
Planning budget=$2,940+$2,555
Planning budget=$5,495
Now let calculate for the activity variance
Using this formula
Activity variance=Flexible budget-Planning budget
Let plug in the formula
Activity variance=$3,955-$5,495
Activity variance=$1,540 Favorable
Therefore the Activity variance for cleaning equipment and supplies in September is closest to:$1,540 Favourable reason been that the flexible budget is lesser than the planning budget
Prepare a statement of cash flows using the indirect method for the year ended June 30, 2019. (Amounts to be deducted should be indicated with a minus sign.) IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Changes in current operating assets and liabilities Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2018 2019 Assets 93,700 $67,000 Cash Accounts receivable, net 99,500 86,800 6,700 74,000 121,000 Inventory Prepaid expenses 10,000 272,000 138,000 Total current assets 286,700 147,000 Equipment Accum. depreciation-Equipment (38,500) (20,500) $395,200 $389,500 Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable $48,000 $64,500 8,300 5,700 19,600 8,400 Total current liabilities 62,000 92,500 Notes payable (long term) Total liabilities 53,000 115,000 83,000 175,500 Equity Common stock, $5 par value Retained earnings 266,000 183,000 31,000 14,200 Total liabilities and equity $395,200 $389,500 IKIBAN INC Income Statement For Year Ended June 30, 2019 Sales $793,000 434,000 359,000 Cost of goods sold Gross profit Operating expenses Depreciation expense $81,600 Other expenses 90,000 Total operating expenses 171,600 187,400 other gains (losses) Gain on sale of equipment 4,300 Income before taxes 191,700 46,190 Income taxes expense $145,510 Net income Additional Information a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $80,600 cash. d. Received cash for the sale of equipment that had cost $71,600, yielding a $4,300 gain e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit.
Answer:
IKIBAN INC.
Statement of cash flow using indirect method for
the year ended June 30, 2019
Particulars Amount $
Cash flow from operating activities
Net Income 145,510
Adjustments to reconcile net income to net
cash provided by operating activities
Adjustment for non cash effects
Depreciation 81,600
Gain on sale of equipment -4,300
Change in operating assets & liabilities
Increase in accounts receivable -25,500
Decrease in inventory 34,200
Decrease in prepaid expenses 3,300
Decrease in accounts payable -16,500
Decrease in wages payable -11,300
Decrease in income taxes payable -2,700
Net cash flow from operating activities (A) 204,310
Cash Flow from Investing activities
New equipment purchased -80,600
Equipment sold 12,300
Net cash Flow from Investing activities (B) -68,300
Cash Flow from Financing activities
Cash dividends paid -162,310
($31,000 + $145,510 - $14,200)
Common stock issued 83,000
Notes payable paid -30,000
Net cash Flow from Financing activities (C) -109,310
Net Change in cash = A+B+C $26,700
($204,310 - $68,300 - $109,310)
Beginning cash balance $67,000
Closing cash balance $93,700
Sparks Corporation has a cash balance of $9,300 on April 1. The company must maintain a minimum cash balance of $7,500. During April, expected cash receipts are $51,000. Cash disbursements during the month are expected to total $56,500. Ignoring interest payments, during April the company will need to borrow:________
a) $3,800
b) $5,500
c) $3,700
d) $7,500
Answer:
c) $3,700
Explanation:
Excess balance after minimum cash balance = $9,300 - $7,500 = $1,800
Excess cash disbursement=$56,500 - $51,000 = $5,500
In April the company will need to borrow =$5,500- $1,800 = $3,700
Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate of total fixed costs. How would this business decision impact operating income?
Complete Question:
The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows:
Narrative Blanket Pillow Total
Revenue $620,000 $300,000 $920,000
Variable cost ($455,000) ($241,000) ($696,000)
Contribution $165,000 $59,000 $224,000
Fixed cost ($74,000) ($74,000) ($148,000)
Operating Income $91,000 ($15,000) $76,000
Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate $74,000 of total fixed costs. How would this business decision impact operating income?
A. increase of $15,000 in operating income
B. increase of $133,000 in operating income
C. increase of $74,000 in operating income
D. decrease of $59,000 in operating income
Answer:
A. increase of $15,000 in operating income
Explanation:
We can see that if the we continue both product line then the profit is $76k which is lower than the profit of $91k generated from continuing Blankets product line only. If we abandon the pillow production then the loss that pillow manufacturing is producing will be totally eliminated which is $15k. The reason is that fixed cost is specific fixed cost which means it can be eliminated if the company abandons the production of pillow product line. Hence the operating income will increase by $15,000 ($91k - $76k). Option A is correct here.
A new customer, age 45, has been terminated from his assembly-line job of the past 20 years at an automotive parts supplier. During that time period, he has accumulated $124,000 in the company's 401(k) plan. He wishes to rollover the funds to an IRA account with your brokerage firm. This customer, who is an unsophisticated investor, has the entire 401(k) invested in a growth mutual fund and has no other investments. As the representative for this customer, you should be concerned about:________
Answer:
communicating effectively with an unsophisticated customer in an understandable manner to assess financial goals and risk tolerance
Explanation:
The new customer who has accumulated $124,000 in his company's 401(k) plan wants to rollover his funds with a brokerage firm.
However he only invested in a growth mutual fund.
This is a scenario that could lead to total loss for the customer if the growth mutual fund fails. A better approach would have been to invest in more than one option.
The first action should be to communicate effectively with the unsophisticated customer in an understandable manner to assess financial goals and risk tolerance.
Based on his Prefered objectives an investment plan can be recommended for him
Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows: Product Names Window Cleaner (ammonia) Floor Cleaner (bleach) Direct materials information Standard ounces per unit oz. oz. Standard price (SP) per ounce ? Actual quantity (AQ) used per unit oz. oz. Actual price (AP) paid for material Actual quantity purchased (AQP) and used oz. oz. Price variance ? U Quantity variance U ? Flexible budget variance ? F Number of units produced What is the direct material quantity variance for the bleach?
Complete Question:
Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows:
Product Names Window Cleaner Floor Cleaner
(ammonia) (bleach)
Direct materials information
Standard ounces per unit 16 oz. 24 oz.
Standard price (SP) per ounce $ 0.25 ?
Actual quantity (AQ) used per unit 20 oz. 22 oz.
Actual price (AP) paid for material $ 1.75 $ 0.72
Actual quantity purchased (AQP) / used 1,000 oz. 2,800 oz.
Price variance ? $ 56 U
Quantity variance $4,900 U ?
Flexible budget variance ? $ 504 F
Number of units produced 700 400
What is the direct materials flexible budget variance for ammonia?
A.$6,400 favorable
B.$6,400 unfavorable
C.$3,400 unfavorable
D.$3,400 favorable
Answer:
Squeaky CleanThe Direct Materials Flexible Budget Variance for ammonia is:
B. $6,400 unfavorable
Explanation:
1. Data and Calculations:
Actual quantity purchased = 1,000 oz
Actual price = $1.75
Standard price = $0.25
2. Direct Material Price Variance
= Actual Material Purchased (Actual Rate - Standard Rate)
= 1,000 * ($1.75 - $0.25)
= $1,500 (Unfavorable)
3. Direct Materials Quantity Variance is given as $4,900 Unfavorable.
4. Therefore, the Direct Material Flexible Budget Variance will be equal to the Direct Material Price Variance + the Direct Material Quantity Variance
Flexible Budget Variance for Ammonia
= $1,500 (U) + $4,900 (U)
= $6,400 (Unfavorable)
4. A flexible budget changes or flexes with the actual volume or level of activity. It is not like a static budget that remains static no matter the level of activity. With a flexible budget, the performance of managers can be judged more accurately because their performances are evaluated based on actual volumes or levels of activity.
A safety capacity is a reserve created for unanticipated events. When is a safety capacity used?
A. During the holidays
B. During preventive maintenance and the holidays.
C. Whenever demand surges, there are material shortages, and equipment failure
D. None of the above.
Answer:
C. Whenever demand surges, there are material shortages, and equipment failure
Explanation:
The safety capacity is developed for the events that are not predicted. It can be used for various things like - shortage of materials, break down of machinery and equipment, the power supply is not available at the current time.
Therefore in the given case, option C is chosen as it fits the current situation
Hence, the other options are to be ignored