Answer:
a) -$1,129,000
b) net operating cash flows:
year 1 = $412,239
year 2 = $448,152
year 3 = $350,428
c) total year 3 cash flow (including after tax salvage value and working capital) = $831,759
after tax salvage value = $464,831
working capital = $16,500
d) NPV = $179,733
e) the machine should be purchased
Explanation:
initial investment year 0 = $1,090,000 + $22,500 + $16,500 (net working capital) $1,129,000
depreciation per year:
year 1 = 33.33% x $1,112,500 = $370,796
year 2 = 44.45% x $1,112,500 = $490,506
year 3 = 14.81%% x $1,112,500 = $164,761, carrying value after depreciation = $86,437
if sold at $627,000 at the end of year 3, the after tax net cash flow = $627,000 - [($627,000 - $86,437) x 30%] = $464,831
cash flow year 1 = [($430,000 - $370,796) x (1 - 30%)] + $370,796 = $412,239
cash flow year 2 = [($430,000 - $490,506) x (1 - 30%)] + $490,506 = $448,152
operating cash flow year 3 = [($430,000 - $164,761) x (1 - 30%)] + $164,761 = $350,428
total cash flow year 3 = [($430,000 - $164,761) x (1 - 30%)] + $164,761 + $16,500 + $464,831 = $831,759
NPV = $179,733
21. Perry Inc.'s bonds currently sell for $1,150. They have a 6-year maturity, an annual coupon of $85, and a par value of $1,000. What is their current yield
Answer:
7.39%
Explanation:
The Current Yield = Annual Coupon / Current Price *100
= $85 / $1150 * 100
= 7.391304348%
= 7.39%
Hence, the correct answer is 7.39%
Houston, Inc., planned and actually manufactured 200,000 units of its single product in 2017, its first year of operation. The variable manufacturing cost was $24 per unit produced. The variable operating (nonmanufacturing) cost was $9 per unit sold. Planned and actual fixed manufacturing costs were $600,000.Planned and actual fixed operating (nonmanufacturing) costs totaled $370,000. Houston sold 100,000 units of a product at $45 per unit.
Houston?s 2017 operating income using absorption costing is
(a) $530,000
(b) $230,000
(c) $600,000
(d) $900,000
(e) none of these
Answer:
(a) $530,000
Explanation:
Sales = 100,000 units for $45 per unit = $4,500,000
Less: Cost of Goods Sold
Cost of manufacturing = 100,000 units for $27 per unit = $2,700,000
Variable cost at $24 per unit
Fixed [tex]\frac{600,000}{200,000} = 3[/tex] per unit
Gross income = $1,800,000
Less: Non Manufacturing Expense
Variable = 100,000 units at $9 per unit = $900,000
Fixed = $370,000
Total Non manufacturing expense = $1,270,000
Operating Income as per absorption costing = $1,800,000 - $1,270,000 = $530,000
Under absorption costing method everything expect the non manufacturing fixed expense are consumed on per unit basis, but fixed non manufacturing fixed expense are completely absorbed as are not incurred for manufacturing thus, not charged to finished goods but only to goods sold.
Why and how are customers a critical piece of the supply chain with regards to sustainability?
Answer:
To achieve a sustainable supply chain, a company has to address environmental, social, economic and legal concerns across its entire supply chain. By taking a holistic approach, this reduces waste and environmental footprint, while also improving labour conditions and health and safety — stopping worker exploitation.
Which of the following is NOT a good way to build a relationship during an interview?
a. Stay close to the script so you don't waste the respondent's time with small talk.
b. Smile, even during phone interviews.
c. Share a common interest to help break the ice.
d. Quietly accept opinions that you don't share with your interviewee.
Answer:A
Explanation: maybe
If a person sticks to the script, he will not waste the participant's time, which is a good way to create a correlation throughout an interview.
What is the relevance of interview?When conducted in good order, an interview lets the leader determine whether an applicant's accomplishments, education, and personality match the job's requirements.
If a person loco motes the script, he will not utilize the time of the associates, which is a great mode to create a connection throughout an interview.
Therefore, option A is correct.
To learn more about the interview, refer to:
https://brainly.com/question/15128068
#SPJ2
The City of Waterman established a capital projects fund for the construction of an access ramp from the parking garage to the city’s office building to be used by individuals with disabilities. The estimated cost of the ramp is $213,000. On January 1, 20X2, a 10 percent, $154,000 bond issue was sold at 103 with the premium transferred to the debt service fund. At that date, the county board provided a $59,000 grant. After a period of negotiation, the city council awarded a construction contract for $186,000 on April 5, 20X2. The ramp was completed on August 8, 20X2; its actual cost was $193,000. The city council approved payment of the total actual cost of $193,000. In addition to the $193,000, the ramp was carpeted with all-weather material at a cost of $6,780. On November 3, 20X2, the city council gave the final approval to pay for the ramp and the carpeting. After all bills were paid, the remaining fund balance was transferred to the debt service fund.The City of Waterman established a debt service fund to account for the financial resources used to service the bonds issued to finance the ramp is $213,000. The 10 percent, $154,000 bond issue was sold at 103 on January 1, 20X2. It is a 10-year serial bond issue. The resources to pay the interest and annual principal will be from a property tax levy.Additional Information:1. The operating budget for 20X2 included estimated revenue of $37,100. Budgeted appropriations included $15,400 for principal, $15,400 for interest, and $4,300 for other items. The budget also included an estimated transfer in of $6,300 from the capital projects fund.2. The property tax levy was for $42,200 and an allowance for uncollectibles of $4,500 was established. Collections totaled $36,100. The remaining taxes were reclassified as delinquent and the allowance was reduced to $1,600. The bond premium was received from the capital projects fund.3. The current portion of the serial bonds and the interest due this year were recorded and paid. Other expenses charged to the debt service fund totaled $1,880, of which $1,400 was paid.4. The nominal accounts were closed.Required:a. Prepare entries for the debt service fund for 20X2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)b. Prepare a balance sheet for the debt service fund as of December 31, 20X2.c. Prepare a statement of revenues, expenditures, and changes in fund balance for the debt service fund for 20X2.
Answer:
The City of Waterman
Debt Service Fund:
1. Journal Entries:
Jan. 1, 20X2:
Debit Capital Projects Fund $154,000
Credit 10% Bonds Payable $154,000
To record the issue of a 10 percent, $154,000 bond sold at 103.
Debit Debt Service Fund $4,620
Credit Bonds Premium $4,620
To record the premium on the bond issue.
Debit Capital Projects Fund $59,000
Credit Grant from Country Board $59,000
To record the receipt of a grant.
April 5:
Debit Ramp Construction $186,000
Credit Contracts Payable $186,000
To record the award of construction contract.
August 8:
Debit Ramp Construction $7,000
Credit Contracts Payable $7,000
To record the additional cost of construction.
Debit Ramp Carpeting $6,780
Credit Contracts Payable $6,780
To record the award for carpeting the ramp.
November 3:
Debit Contracts Payable $193,000
Credit Capital Projects Fund $193,000
To record payment for ramp construction contract.
Debit Contracts Payable $6,780
Credit Capital Projects $6,780
To record payment for the ramp carpeting.
Debit Debt Service Fund $13,220
Credit Capital Projects Fund$13,220
To record the transfer of the balance to the debt service fund.
2. The City of Waterman Balance Sheet for the debt service fund as of December 31, 20X2:
Debt Service Fund:
Bonds Premium $4,620
Capital Projects Fund $13,220
3. The City of Waterman Statement of revenues, expenditures, and changes in fund balance for the debt service fund for 20X2:
Revenue from 10% Bonds Payable $154,000
Grant from Country Board 59,000
Cost of Ramp construction (193,000)
Cost of Ramp carpeting (6,780)
Fund Balance 13,220
Explanation:
The City of Waterman's general journal records the transactions that occur about the capital projects fund established by the City of Waterman in order to construct the access ramp from the parking garage to the city’s office building to be used by individuals with disabilities. In the same way, the balance sheet and the statement of revenues, expenditures, and changes in fund balance state the debt service fund balance and the revenues and expenditures during the period.
On January 1, 2017, when the market interest rate was 14%, Luba Corporation issued bonds
in the face amount of $500,000 with interest at 12% payable semiannually. The bonds mature
on December 31, 2026.
Required:
Calculate the bond discount at issuance. How much of the discount should be amortized by the
effective interest method on July 1, 2017?
I am confused about how Discount is calculated? What table if any do I have to refer to.....
Face value is $500,000
Discount (52,970)
Selling Price of bond $447,030
Answer:
the bond discount = face value - market value
market value = PV of face value + PV of coupon payments
PV of face value = $500,000 / (1 + 7%)²⁰ = $129,209.50
PV of coupon payments = $30,000 x 10.594 (PV annuity factor, 7%, 20 periods) = $317,820
market value = $447,029.50
January 1, 2017, bonds are issued at a discount
Dr Cash 447,029.50
Dr Discount on bonds payable 52,970.50
Cr Bonds payable 500,000
the discount amortization for first coupon payment = ($447,029.50 x 7%) - $30,000 = $31,292 - $30,000 = $1,292
July 1, 2017, first coupon payment
Dr Interest expense 31,292
Cr Cash 30,000
Cr Discount on bonds payable 1,292
Weight Return Bonds (Lehman Brothers Index) 50 % 5 % Stocks (S&P 500 Index) 50 % 15 % The total excess return on the Aggie managed portfolio was
Please see full question attached
Answer:
Option C: 4%
Explanation:
Asset allocation simply means the investors allocation of resources in acquiring a mix of assets for his portfolio that produce the best risk-return balance based on investors objectives or profile
Excess return is the excess return from an investment over another investment used in comparison usually a risk free investment such as a treasury bill
Here we will try to determine the asset allocation's contribution to the excess return.
Contribution of asset allocation across markets to total excess return is calculated by the formula =
Weight of bonds - Weight of Lehman's brothers index(bemchmark) for bonds x Lehman brothers index(benchmark) return of bonds + Weight of stocks - Weight of S&p 500 index(benchmark) for stocks x s &p 500 (benchmark)return for stocks
= (0.10 - 0.50) x 0.05 + (0.90 - 0.50) x 0.15
= 4%
Wha) is the name given to the operations used by most organizations to
reach their customer goals?
A. Market planning
B. Research and development
C. Universal marketing functions
D. Customer support
SUBMIT
Answer:it’s c
Explanation:A P E X
Answer:
Explanation:
c
Taylor's stock has plummeted in value and is currently priced at $5 a share. The firm prefers the price exceed $10 a share and thus has decided to do a reverse stock split. However, when it does this, the firm wants the stock price increased to at least twice its preferred minimum as it is concerned the price will fall further. Which one of the following stock split ratios is most appropriate for this situation?
A. 1-for-3
B. 1-for-4
C. 2-for-7
D. 4-for-1
E. 7-for-2
Answer:
D
Explanation:
a reverse stock split is the opposite of a stock split. A reverse stock split reduces the number of shares outstanding.
It is usually done when it is perceived that the stock of a company is undervalued.
In a 4-for-1 split, for every four shares owned by a shareholder, it becomes one. So if a shareholder has 1000 shares at a price of $5, it becomes 1000/ 4 = 250 the shareholder owns. Prices becomes $5 x 4 = $20. this is at least twice its preferred minimum of $10.
A. 1-for-3
B. 1-for-4
C. 2-for-7
are examples of stock splits and not a reverse stock split.
In a 7-for-2, f a shareholder has 1000 shares at a price of $5, price becomes $5 x (7/2) = $17.50
This is not at least twice its preferred minimum of $10.
What would be the best answer
Answer:
D. Logical fallacies are unethical because they use logic to emphasize falsehood.
Explanation:
A logical fallacy is reasoning or error of argument which is logically incorrect and renders the validity of an argument invalid.
There are types of logical fallacies such as Ad Hominem, Straw man, etc.
Logical fallacies are easily identified because they usually lack evidence to support their claim.
When something is said to be unethical, it means that it is morally wrong.
Therefore, the false statement from the list is that logical fallacies are unethical because they use logic to emphasize falsehood.
Oakleaf Manufacturing incurs costs of $75 ($67 variable and $8 fixed) to make a product that normally sells for $120. A customer offers to buy 4,200 units for $70 each. Assuming Oakleaf has adequate manufacturing capacity, it should
Answer:
Accept the offer because it will generate incremental net income of $12,600
Explanation:
If Oak accepts the offer, its incremental revenue would be;
4,200 × $70 = $294,000
Its incremental cost would be ;
4,200 × $67 = $281,400
Incremental net net income for the order would be ;
$294,000 - $281,400 = $12,600. Accept the offer.
Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory Ending Inventory Raw material* 56,000 66,000 Finished goods 96,000 66,000Three pounds of raw material are needed to produce each unit of finished product.If Paradise Corporation plans to sell 560,000 units during next year, the number of units it would have to manufacture during the year would be:a) 504,000 unitsb) 560,000 unitsc) 590,000 unitsd) 530,000 units
Answer:
Production= 530,000 units
Explanation:
Giving the following information:
Beginning Inventory= 96,000
Ending Inventory= 66,000
Sales= 560,000 units
To calculate the production required, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
Production= 560,000 + 66,000 - 96,000
Production= 530,000 units
"A primary dealer buys Treasury Securities in a competitive bid at the weekly Treasury Auction. Settlement between the dealer and the Treasury occurs:"
Answer:
On issue date
Explanation:
A primary dealer buys Treasury Securities in a competitive bid at the weekly Treasury Auction. Settlement between the dealer and the Treasury occurs on issue date
Variability is found in every production operation, but most variability is cause by tolerating waste or by poor management. Group of answer choices
Answer: True
Explanation:
Variability simply occurs when there is a deviation from the process which has already been put in place to ensure the perfect and timely delivery of product.
Variability simply means problems ane.the.lesser the problem, the lesser the waste in the system. It should be noted that most variability is cause by tolerating waste or by poor management.
Havermill Co. establishes a $330 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on th merchandise inventory, and $30 for miscellaneous expenses. The october i, the accountant determines that the fund should be increased by $66. The journal entry to record the reimbursement of the fund on September 30 Includes a:_______
a) Debit to Office Supplies for $81.
b) Credit to Merchandise Inventory for $153
c) Credit to Cash for $330.
d) Debit Petty Cash for $264.
e) Credit to Cash for $66.
Answer: a) Debit to Office Supplies for $81.
Explanation:
Office Supplies of $81 were used in the month of September. When replenishing the fund, this asset will be accounted for by being debited and cash will be credited to reflect the reason the cash account is being reduced.
The Journal entry for the replenishment will be;
DR Office supplies Account ......................................$81
DR Merchandise inventory Account ........................$153
DR Misc. expense Account........................................ $30
CR Cash account ......................................................................$264
Crowder Company acquired a tract of land containing an extractable natural resource. Coronado is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2560000 tons, and that the land will have a value of $1080000 after restoration. Relevant cost information follows:
Land $9,000,000
Estimated restoration costs 1,500,000
If Crowder maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?extracted material?
A. $1.90
B. $2.10
C. $1.60
D. $1.80
Answer:
Depletion expense per ton = $3.68
Explanation:
Calculation of Total Cost
Total cost = Land + Estimated restoration costs
Total cost = $9,000,000 + 1,500,000
Total cost = $10,500,000
The depletion expenses of Crowder Company is as calculated below:
Depletion expense per ton = (Asset cost - Residual value) / No of unit depletion
Depletion expense per ton = $10,500,000 - $1,080,000 / 2,560,000 tons
Depletion expense per ton = $9,420,000 / 2,560,000 tons
Depletion expense per ton = $3.68
The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:
Answer:
Zero based budgeting
Explanation:
In the zero based budgeting, the budget should be prepared from the starting i.e. based on the available budgeted income. Also it is not same as traditionla budget as no previous years statements should be considered
Also new prediction could be taken in consideration due to which it is costly and time consuming process
Therefore for initiated the first time, the zero based budgeting is used
Purchases in May were $65,000, while expected purchases for June and July are $75,000 and $93,000, respectively. All purchases are paid % in the month of purchase and % in the following month. At what amount are June payments for purchases budgeted?
Answer:
$61,000
Explanation:
The computation of June payments for purchases budgeted is shown below:-
June payments for purchases budgeted = Purchase of June × Purchase percentage + May purchase × Percentage of the following month
= $75,000 × 25% + $65,000 × 65%
= $18,750 + $42,250
= $61,000
Therefore for computing the June payments for purchases budgeted we simply applied the above formula.
Bruner Stores wants to have 900 shovels in ending inventory on December 31. Budgeted sales for December are 2,500 shovels. The November 30 inventory was shovels. How many shovels should Benson Stores purchase for December?
Answer: 2,900 shovels
Explanation:
Ending Inventory = Beginning Inventory + Total Inventory Purchased - Sales
900 = 500 + Total produced - 2,500
Total Purchased = 900 + 2,500 - 500
Total purchased = 2,900 shovels
NB; There was no beginning balance in your question so I gave a random figure of 500 units. Use the equation if the figure is different.
Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs are $2.30 per unit, fixed costs related to making this part are $60,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.50 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 60,000 and buying 60,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?
Answer:
the costs of producing the parts is $12,000 less than buying them from an outside vendor
Explanation:
production costs (60,000 units)
variable $2.30 per unit
fixed (avoidable) $1 per unit
fixed (unavoidable) $0.75 per unit
total $4.05 per unit
price from outside supplier $3.50 per unit
total incremental cost of buying from outside supplier = (60,000 x $3.50) + (60,000 x $0.75) = $210,000 + $45,000 = $255,000
production costs to manufacture = 60,000 x $4.05 = $243,000
the costs of producing the parts is $12,000 less than buying them from an outside vendor
Genesee Organics has just bought a new packing machine for its warehouse.
The total cost was $750,000. The CCA rate is 25%. What is the CCA for Year 2?
Answer:
CCA for year 2 is $164,062.50
Explanation:
Total cost of machine = $750,000
CCA rate = 25%
CCA in year 1 = (Total cost / 2) * CCA rate
CCA in year 1 = ($750,000/2)*0.25
CCA in year 1 = $93,750
For year 2, CCA = (Total cost - CCA in year 1) *CCA rate
For year 2, CCA = ($750,000 - $93,750)*0.25
For year 2, CCA = $164,062.50
Hence, CCA for year 2 is $164,062.50
A joint venture is an attractive way for a company to enter a new industry when:________.
A) the pool of attractive acquisition candidates in the target industry is relatively small.
B) it needs better access to economies of scope in order to be cost-competitive.
C) the industry is growing slowly and adding too much capacity too soon could create oversupply conditions.
D) the firm has no prior experience with diversification and the industry is on the verge of explosive growth.
E) the opportunity is too risky or complex for a company to pursue alone or when a company lacks some important resources or competencies and needs a partner to supply them.
Answer:
Correct Answer:
E) the opportunity is too risky or complex for a company to pursue alone or when a company lacks some important resources or competencies and needs a partner to supply them.
Explanation:
A joint venture is a process by which two or more company come together by pooling resources together in-order to venture into a business which they have common interest in.
A business tenant pays 2% of his total gross sales volume as rent, with a minimum base rental of $1,000 per month. In the past year, his sales totaled $435,000. How much rent did he pay?
Answer:
$12,000
Explanation:
Calculation for the amount of rent he paid.
First step is to calculate his sales amount for the year using this formula
Sales = Percentage of total gross sales volume× Sales amount
Let plug in the formula
Sales =2%×$435,000
Sales=$8,700
Second step is to calculate his minimum base rental using this formula
Minimum base rental = Numbers of month × Monthly payment
Let plug in the formula
Minimum base rental= 12 months ×$1,000 per month
Minimum base rental=$12,000
Based on the calculation his minimum annual base rent will be $12,000 which is higher than tha amount of $8,700 which means that the tenants paid the amount of $12,000.
Therefore the amount he paid for his rent will be $12,000.
Accounts receivable $ 35,000 debit Allowance for uncollectible accounts 500 credit Net Sales 180,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? Multiple Choice $2,500 $1,080 $1,775 $1,275 $1,500
Answer:
$1,080
Explanation:
Calculation for the amount that should be debited to Bad Debts Expense
Using this formula
Bad Debts Expense=Net Sales× Percentage of net credit sales uncollectible.
Let plug in the formula
Bad Debts Expense=180,000 credit×0.6%
Bad Debts Expense=$1,080
Therefore the amount that should be debited to Bad Debts Expense when the year-end adjusting entry is prepared will be $1,080
A high marginal propensity to expend will cause the multiplier to be smaller.
A. True
B. False
Answer:
False
Explanation:
August, Inc. had the following transactions in 2018, its first year of operations: Issued shares of common stock. The stock has par value of per share and was issued at per share. Issued shares of par value preferred stock at par. Earned net income of . Paid no dividends. At the end of 2018, what is total stockholders' equity
Answer:
A. $601,000
Explanation:
The numbers are missing, so I looked for a similar question:
August, Inc. had the following transactions in 2018, its first year of operations: Issued 21,000 shares of common stock. The stock has par value of $3.00 per share and was issued at $18.00 per share. Issued 1,100 shares of $170.00 par value preferred stock at par. Earned net income of $36,000. Paid no dividends. At the end of 2018, what is total stockholders' equity? A. $601,000 B. $250,000 C. $315,000 D. $565,000
Dr Cash 378,000
Cr Common stock 63,000
Cr Additional paid in capital 315,000
Dr Cash 187,000
Cr Preferred stocks 187,000
Dr Income summary 36,000
Cr retained earnings 36,000
Total stockholders' equity = $63,000 + $315,000 + $187,000 + $36,000 = $601,000
A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold 380,000 Sales revenue $ 2,736,000 Variable manufacturing expense $ 1,349,000 Fixed manufacturing expense $ 336,000 Variable selling and administrative expense $ 399,000 Fixed selling and administrative expense $ 372,000 Net operating income $ 280,000 The company's break-even in unit sales is closest to:
Answer:
Break-even point in units= 272,308 units
Explanation:
Giving the following information:
Variable manufacturing expense $ 1,349,000
Variable selling and administrative expense $ 399,000
Total variable cost= 1,748,000
Fixed manufacturing expense $ 336,000
Fixed selling and administrative expense $ 372,000
Total fixed costs= 708,000
First, we need to calculate the unitary selling price and unitary variable cost:
Unitary selling price= 2,736,000/380,000= $7.2
Unitary variable cost= 1,748,000/380,000= $4.6
Now, to calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 708,000 / (7.2 - 4.6)
Break-even point in units= 272,308 units
Below is the common equity section (in millions) of Fethe Industries' last two year-end balance sheets:
2015 2014
Common stock $2,000 $1,000
Retained earnings 2,000 2,340
Total common equity $4,000 $3,340
The company has never paid a dividend to its common stockholders. Which of the following statements is CORRECT?
a. The company's net income in 2014 was higher than in 2015.
b. The company issued common stock in 2015.
c. The market price of the company's stock doubled in 2015.
d. The company had positive net income in both 2014 and 2015, but the company's net income in 2014 was lower than it was in 2015.
e. The company has more equity than debt on its balance sheet.
Answer: b. The company issued common stock in 2015.
Explanation:
Common Stock is recorded at par value in the books and so the only things that can affect it are more stock being issued which would increase it or treasury stocks being purchased which would decrease it.
As the common stock increased in 2015 from 2014 by $1,000 more, it shows that the company issued $1,000 worth of stock in 2015.
A firm operates in manufacture of lysine for industrial use. Lysine sells in a perfectly competitive industry for $35.00 per ton produced. The costs of raw materials such as sugars, water, gas and electricity and labor average to $29.00 per ton. These costs can be avoided by shutting down. The cost of the lease on machinery, the building, and the shipping vehicles average an additional $8.50 per ton; costs that would take a longer time to terminate based on the long-term contracts involved. Based on this information, what is the best course of action for the firm?
Answer:
Continue the production of Lysine until the cost of leasing machinery, the building, and the shipping vehicles becomes avoidable.
Explanation:
We will use relevant costing here to assess whether we must close the production of Lysine or not.
According to relevant costing principles if the cost is relevant then it must satisfy following conditions:
Must be cash flow in nature.Must be Future related (no past commitments).Differential or must be incrementalClearly cash would be used here and the cost or income arising must not be linked to the past bindings, it must be future related. The third condition is very interesting here, the concept of differential.
A differential cost will arise if we take the decision (closing down production of Lysine), and it will not arise if we don't take the decision (closing down production of Lysine).
All the variable costs will be relevant which means that variable cost of $29 per ton is relevant. Variable costs are also known as avoidable cost which means unavoidable costs will not be relevant here.
Here, unavoidable costs are $8.5 per ton and are unavoidable.
Hence
Contribution per unit generated = $35 per ton - $29 per ton = $6 per ton
This means if we close the production of Lysine then we will suffer a loss of $6 per ton
Hence the company must continue producing Lysine until it is able to avoid cost of $8.5 per ton. In which case, the cost will become relevant and the decision will be altered to stop production.
Mathematically, (If $8.5 per ton becomes avoidable in future)
Contribution = $35 per ton - $29 per ton - $8.5 per ton = Loss of $2.5 per ton
Best Course of Action:Continue the production of Lysine until the cost of leasing machinery, the building, and the shipping vehicles becomes avoidable.
Kindly don't forget to rate the question.
You purchased a zero-coupon bond one year ago for $283.83. The market interest rate is now 9 percent. Assume semiannual compounding. If the bond had 15 years to maturity when you originally purchased it, what was your total return for the past year?
Answer:
2.73%
Explanation:
Price of Zero Coupon Bond now = 1,000 / (1 + 0.09 / 2)^28
Price of Zero Coupon Bond now = 1,000 / (1 + 0.09 / 2)^28
Price of Zero Coupon Bond now = 1,000 / 3.4297
Price of Zero Coupon Bond now = $291.57
Rate of Return = (291.57 - 283.83) / 283.83
Rate of Return = 2.73%