Answer:
FALSE
Explanation:
Bob the accountant needs to record indirect labor utilized of $6,000 in a journal entry. Bob should:_____.
a. debit Manufacturing Overhead, $6,000; credit Wages Payable, $6.000.
b. debit Accounts Payable, $6,000; credit Manufacturing Overhead, $6,000.
c. debit Manufacturing Overhead, $6,000; credit Accounts Payable, $6,000.
d. debit Wages Payable, $6,000; credit Manufacturing Overhead, $6,000.
Answer:
c. debit Manufacturing Overhead, $6,000; credit Accounts Payable, $6,000
Explanation:
The journal to record indirect labor utilized of $6,000 will include a Debit to an Expense Account - Manufacturing Overhead and a Credit to Liability Account - Accounts Payable at the value of $6,000.
Mary Kate, Ashley, Dakota, and Elle each want to buy a new home. Each needs to save enough to make a 20% down payment. For example, to buy a $100,000 home, a person would need to save $20,000. At the end of each year for five years, the women make the following investments:
Person Annuity Payment Type of Account Expected Annual Return
Mary Kate $3,900 Savings 3%
Ashley 4,900 CDs 5
Dakota 5,900 Bonds 6
Elle 5,900 Stocks 12
Required:
What is the maximum amount each woman can spend on a home, assuming she uses her accumulated investment account to make a 20% down payment?
Answer:
Mary Kate: $103,528.15
Ashley: $135,377.97
Dakota: $166,294.24
Elle: $187,409.00
Explanation:
Mary Kate
First, calculate the future value of investment
Future value of Investment = Annuity payment x ( 1 + Interst rate )^numbers of years - 1 / Interst rate = $3,900 x ( 1 + 3% )^5 - 1 / 3% = $20,705.63
Amount affordable = Future value of investment / Rate of down payment = $20,705.63 / 20% = $103,528.15
Ashley
First, calculate the future value of investment
Future value of Investment = Annuity payment x ( 1 + Interst rate )^numbers of years - 1 / Interst rate = $4,900 x ( 1 + 5% )^5 - 1 / 5% = $27,075.59
Amount affordable = Future value of investment / Rate of down payment = $27,075.59 / 20% = $135,377.97
Dakota
First, calculate the future value of the investment
Future value of Investment = Annuity payment x ( 1 + Interst rate )^numbers of years - 1 / Interst rate = $5,900 x ( 1 + 6% )^5 - 1 / 6% = $33,258.85
Amount affordable = Future value of investment / Rate of down payment = $33,258.85 / 20% = $166,294.24
Elle
First, calculate the future value of the investment
Future value of Investment = Annuity payment x ( 1 + Interst rate )^numbers of years - 1 / Interst rate = $5,900 x ( 1 + 12% )^5 - 1 / 12% = $37,481.80
Amount affordable = Future value of investment / Rate of down payment = $37,481.80 / 20% = $187,409.00
In recent years, rules have tightened such that those who work for the U.S. government in trade negotiations are now restricted from working for lobbyists for foreign firms. Take the stance of either for or against that statement. Provide justification for your stance.
Answer: For this statement.
Explanation:
People will generally offer their loyalties to those who pay them the highest or who pay them at all and companies will typically be loyal to their country of origin.
What this means is that trade negotiators who work for lobbyists of foreign firms will typically want to advance the interests of the foreign firms when negotiating trade deals for the U.S. government.
This presents a problem because the foreign companies might want to negotiate a deal that favors their own countries over the United States so if trade negotiators that are on their side are the ones negotiating for the United States, the U.S. might not get a good enough deal.
Imagine for instance, a person negotiating a trade deal for the U.S. with China but the person works for lobbyists of Huawei. It is reasonable to assume that the person would want to advance the interests of China on behalf of Huawei. Restricting such a person from negotiating for the U.S. reduces such a possibility.
If demand increases and supply stays the same, price will be………
Answer:
If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
Explanation:
If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price. If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
Answer:
If demand increases and supply stays the same then equilibrium quantity goes up, and equilibrium price goes up. If demand decreases and supply increases then equilibrium quantity could go up, down, or stay the same, and equilibrium price will go down
Explanation:
Eddie Zambrano Corporation began operations on January 1, 2017. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.
Net Income Dividends Declared
2017 $ 40,000 $ –0–
2018 125,000 50,000
2019 160,000 50,000
The following information relates to 2020.
Income before income tax $240,000
Prior period adjustment: understatement of 2018 depreciation expense (before taxes) $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021) $100,000
Effective tax rate 20%
Instructions
a. Prepare a 2020 retained earnings statement for Eddie Zambrano Corporation.
b. Assume Eddie Zambrano Corporation restricted retained earnings in the amount of $70,000 on December 31, 2020. After this action, what would Zambrano report as total retained earnings in its December 31, 2020, balance sheet?
Answer:
Eddie Zambrano Corporation
a. Retained Earnings Statement for the year ended December 31, 2020
Retained earnings, January 1, 2020 = $225,000
2020 Income after tax = $192,000
Prior period adjustment: understatement of 2018 depreciation expense (before taxes) ($ 25,000)
Cumulative decrease in income from change in inventory methods (before taxes) ($ 35,000)
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021)
($100,000)
Total deductions = $160,000
Retained earnings, December 31 $257,000
b. With the restricted retained earnings in the amount of $70,000, dividends declared cannot exceed $62,000 ($100,000 - $38,000), therefore the Retained earnings in its December 31, 2020 balance sheet would be $295,000.
Explanation:
a) Data and Calculations:
Net Income Dividends Declared Cumulative Retained Earnings
2017 $ 40,000 $ –0– $40,000 ($40,000)
2018 125,000 50,000 115,000 ($40,000 + 75,000)
2019 160,000 50,000 225,000 ($115,000 + 110,000)
2020 Income before tax = $240,000
Tax for 2020 (20%) 48,000
2020 Income after tax = $192,000
Prior period adjustment: understatement of 2018 depreciation expense (before taxes) $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021) $100,000
Total deductions = $160,000 ($25,000+35,000+100,000)
Retained earnings for 2020 = $32,000 ($192,000 - $160,000)
a. Retained Earnings Statement for the year ended December 31, 2020
Retained earnings, January 1, 2020 = $225,000
2020 Income after tax = $192,000
Prior period adjustment: understatement of 2018 depreciation expense (before taxes) ($ 25,000)
Cumulative decrease in income from change in inventory methods (before taxes) ($ 35,000)
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021)
($100,000)
Total deductions = $160,000
Retained earnings, December 31 $257,000
b. With the restricted retained earnings in the amount of $70,000, dividends declared cannot exceed $62,000 ($100,000 - $38,000), therefore the Retained earnings in its December 31, 2020 balance sheet would be $295,000 ($257,000 + $38,000).
Which of the following organizations currently is responsible for establishing and improving standards of financial accounting and reporting for the guidance and education of the public, which includes issuers, auditors, and users of financial information?
a. The Accounting Principles Board.
b. The Committee on Accounting Procedure.
c. The Financial Accounting Standards Board
d. All of the answer choices are correct.
Answer:
C)Financial Accounting Standards Board (FASB)
Explanation:
The Financial Accounting Standards Board can be regarded as a private as well as a non-profit organization standard-setting body that is been set up primarily for establishment as well as improvement of Generally Accepted Accounting Principles in the interest of the public, it base in United States. It is set up carry out purposes such as financial accounting as well as reporting of standards for both public and private companies. It was established in year 1973. It should be noted that Financial Accounting Standards Board is a kind of organizations that is currently
responsible for establishing and improving standards of financial accounting and reporting for the guidance and education of the public, which includes issuers, auditors, and users of financial information.
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information concerning the purchase and use of Echol follows:
Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $115 per container. A discount of 2% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $130 for an average shipment of 100 15-gallon containers of Echol.
Use of Echol The bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent. (Each gallon contains four quarts.) About 5% of all Echol used is lost through spillage or evaporation. In addition, statistical analysis has shown that every 41st bottle is rejected at final inspection because of contamination.
Required:
a. Compute the standard purchase price for one quart of Echol.
b. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.
c. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.
Answer: a. $1.90
b. 8.2 quarts
c. $15.58
Explanation:
a. Compute the standard purchase price for one quart of Echol.
Cost per 15 gallon container = $115
Less: Cash discount= 2% × $115 = $2.30
Net cost = $115 - $2.30 = $112.70
Add: Shipping cost = $139/100 = $1.30
Total cost = $112.70 + $1.30 = $114
Number of quarts per container = (15 × 4) = 60
Standard cost per quart = $114/60 = $1.90
b. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.
Content per bill of materials = 7.6 quart
Add: Allowance for evaporation and spillage = 8.0 - 7.6 = 0.4 quart
Add: Allowance for rejected unit = 8.0/40 = 0.2 quarts
Standard quantity of Echol per salable bottle of cleaning solvent = 7.6 + 0.4 + 0.2 = 8.2 quarts
c. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.
This will be:
= 8.2 quart × $1.90 per quart
= $15.58
Bull'sEye sells gift cards redeemable for Bull'sEye products either in-store or online. During 2016, Bull'sEye sold $2,000,000 of gift cards, and $1,800,000 of the gift cards were redeemed for products. As of December 31, 2016, $150,000 of the remaining gift cards had passed the date at which Bull'sEye concludes that the cards will never be redeemed. How much gift card revenue should Bull'sEye recognize in 2016?
a) $2,000,000
b) $1,950,000
c) $1,850,000
d) $1,800,000
Answer:
b) $1,950,000
Explanation:
Value of gift cards redeemed with those whose date of redemption has passed, will both have the amount to revenue out of $2,000,000 of the gift cards sold.
Total gift card revenue to be recognized in 2016 = $1,800,000 + $150,000
Total gift card revenue to be recognized in 2016 = $1,950,000
The Prakash Estate has equal income beneficiaries Sam and Janet. As allowed by the terms of the will, the estate makes no income distributions during the current tax year. The estate’s personal exemption is:______________
a. $0.
b. $100.
c. $300.
d. $600.
e. The exemption depends on the amount of taxable income of the estate.
Answer:
d. $600
Explanation:
The real estate owners are allowed personal exemption of up to $600. Prakash Estate is also entitled to for personal exemption in current tax year. The estate has not made any income distribution in the current year and all the partners have equal income setup in the estate.
Hayden Company is considering the acquisition of a machine that costs $406,000. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $96,000, and annual operating income of $81,600. What is the estimated cash payback period for the machine (round to one decimal points)? a.6.2 years b.5.0 years c.4.2 years d.1.2 years
Answer:
c.4.2 years
Explanation:
The computation of the estimated cash payback period is given below:
As we know that
the estimated cash payback period is
= initial investment ÷ net cash flow per period
= $406,000 ÷ $96,000
= 4.2 years
Hence, the estimated cash payback period is 4.2 year
Therefore the option c is correct
A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the summer market for gasoline?
a) an unpredictable change in the price and a decrease in the quantity
b) an unpredictable change in both the price and the quantity
c) an increase in the price and an unpredictable change in the quantity
d) an increase in the price and the quantity
Answer:
Option "C" is the answer.
Explanation:
Option "C" is the answer.
The decrease in the supply of oil will shift the supply curve leftwards. Similarly, the increases in the demand will shift the demand curve rightwards. The leftwards shift in the supply and rightward shift in the demand curve will result in an increase in price but the change in quantity can not be predicted because the magnitude of change will depend on the shift in the curves.
Accountants focus on creating financial statements, whereas finance professionals use these statements to evaluate a firm and answer questions about its performance. Indicate which financial statement you would refer to when answering the questions in the following table:
Income Statement Statement of Retained Earnings
How profitable has the firm been?
How much of the firm's earnings are left as balance after the firm pays out dividends to its shareholders?
If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:
a. Overstate its earnings
b. Understate its earnings
Answer:
1. Indication of financial statement to refer to when answering questions in the following table:
Question Financial Statement
How profitable has the firm been? Income Statement
How much of the firm's earnings are Statement of Retained Earnings
left as balance after the firm pays out
dividends to its shareholders?
2. If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:
a. Overstate its earnings
Explanation:
Company A's Income Statement shows its profit performance at different levels. At one level is the gross profit, which shows the difference between the net sales or service revenue and the cost of sales/service. At another level is the operating income, which is the income before interest and taxes. The next important level is the net income, which is the profit after taxes. This shows the earnings available for distribution to stockholders. The Statement of Cash Flows classifies the cash flows generated into operating, investing, and financing activities, and shows the non-cash flow adjustments.
Christopher started a tutoring website. After a few months, a publishing company files a lawsuit against his company for copyright infringement. Christopher had to close his business and sell all of the business's assets and his car in order to settle the lawsuit. This is an example of?
A. Corporation
B. Partnership
C. Proprietorship
D. LLP/LLC
Answer:
C. Proprietorship
Explanation:
A sole proprietorship business is a type of business that is owned by a single person and as such their profits are taxed once as personal income tax.
Basically, it is a type of business that is typically owned by an individual or one person and as such is solely responsible for its debts.
In this scenario, Christopher started a tutoring website and was later sued for copyright infringement by a publishing company.
As a result, Christopher had to close his business and sell all of the business's assets, including his car in order to settle the lawsuit. Thus, this an example of sole proprietorship business because he's only one that own the business and as such would bear the burden of any debt or liability alone.
Swifty Corporation has beginning work in process inventory of $128000 and total manufacturing costs of $277000. If cost of goods manufactured is $280000, what is the cost of the ending work in process inventory?
a. $125000
b. $131000.
c. $140000.
d. $110000.
Answer:
a. $125000
Explanation:
Calculation to determine the cost of the ending work in process inventory
Beginning work in process inventory $128000
Add total manufacturing costs $277000
Less cost of goods manufactured $280000
Ending work in process inventory $125000
($128000+$277000-$280000)
Therefore the cost of the ending work in process inventory is $125000
Steel and aluminum are substitutes. If the price of steel increases, other things remaining the same, we would expect the price of aluminum to __________ and the equilibrium quantity of aluminum to__________
For the 1st question, the options are increase, decrease, remain unchanged
For the 2nd question, the options are increase, decrease, remain unchanged
Answer:
increase
increase
Explanation:
Substitute goods are goods that can be used in place of another good.
If price of steel increases, demand for aluminium increases. this shifts its demand curve to the right. Equilibrium quantity and price increases as a aresult
A company ABC has contracted a third-party logistics company XYZ. Which one of the following functions is least likely to be provided by the third-party logistics company (XYZ) to ABC?
a. inventory control
b. customer service function (e.g., storing spare parts)
c. transportation of goods
d. warehouse management
e. production of components
Answer: Warehouse management
Explanation:
Since the company ABC contracted a third-party logistics company XYZ, some of the functions that can be provided by the third-party logistics company (XYZ) to ABC include:
• inventory control
• customer service function (e.g., storing spare parts)
• transportation of goods
• production of components
It should be noted that performing warehouse management is very unlikely. This simply means the oversight with regards to the operations in the warehouse such as receiving inventory, tracking inventory, managing shipping etc. This should be provided by ABC and not XYZ.
Comfy Clothing is thinking of hiring Tom. If hired, he can increase total production by 100 units a week. He would cost the firm $1,500 a week in wages. If the price of each unit is $20:_______
a. the MR of hiring the worker is $2,000
b. The MC of hiring Tom is $1,500
c. The firm should hire Tom since MR>MC
d. All of the above
Answer: d. All of the above.
Explanation:
The marginal revenue for hiring the workers will be:
= 100 × $20
= $2000
Marginal cost of hiring Tom is $1500. Likewise, the firm should hire Tom since marginal revenue of $2000 is greater than the marginal cost of $1500.
Therefore, the correct option is All of the above.
Imagine you own a food truck that sells gourmet vegan tacos. You rely on many suppliers, all of which also supply their goods to your competitors (other food trucks in the area). For some items, like paper plates and napkins, you have several suppliers. For other items, like extra-firm tofu, you rely on a single supplier. What is an industry analysis most likely to suggest?
a) The power of suppliers is relatively high for some items and relatively low for others. You should find other suppliers of extra-firm tofu so that you have a more diverse supply
b) The power of suppliers is high overall, because you have so many of them You need to consolidate to fewer suppliers, so you have more bargaining power
c) The power of suppliers is relatively low since you work with so many of them. However, you should have your tofu supplier also supply your paper plates and napkins so that you have a more diverse supply of these paper products
d) None of the above Ос.
Answer:
A
Explanation:
Because there are plenty of suppliers for some goods, the food truck owner is more powerful in this case than the suppliers. Here the power of suppliers is low
For the other goods with only a single supplier. the supplier has more powerful than the taco seller. here the power of supplier is high. If the supplier increases price, the taco seller would most likely have an inelastic demand and would be at the mercy of the supplier
thus, the power of suppliers is relatively high for some items and relatively low for others.
Disney suffered lawsuits in France, at Disneyland Paris, because of the lack of fit between its transferred personnel policies and the French employees charged to enact them. This is an example of the: Group of answer choices effect of demand conditions. liability of foreignness. risks of a multidomestic strategy. effects of regionalization.
Answer:
liability of foreignness
Explanation:
Liability of foreignness is defined as the cost above what local firms incur that is realised by companies that operate in a foreign country.
This extra cost is influenced by various business environments that exist in the foreign country.
In the given scenario Disneyland Paris is suffering loss through lawsuits because of the lack of fit between its transferred personnel policies and the French employees charged to enact them.
This conflict is giving an extra cost profile which is referred to as liability of foreignness.
incoterm trong thanh toán quốc tế là gì?
Answer:
Incoterms là một bộ quy tắc thương mại / thương mại được thiết lập bởi Phòng Thương mại quốc tế được sử dụng trong các hợp đồng mua bán quốc tế.
One of the objectives of accounting is to help investors and creditors assess the amount, timing, and uncertainty of cash flows to them.
a. cannot say if it is true or false given the limited information provided
b. this is always a false statement
c. although false for most of the times, there are several exceptions detailed in Canadian GAAP
d. this is always a true statement
e. although true for most of the times, there are several exceptions detailed in Canadian GAAP
Answer: d. this is always a true statement
Explanation:
Accounting is very important in decision making because it provides figures that are useful in planning for the future of an investment. The information provided from accounting analysis helps us determine the amount of cashflows as well as the timing and uncertainty of same.
This is done through various formulas such as Discounted cash flow analysis and Residual income measures. Accounting is therefore invaluable to the financial industry because without it, we would stand a far worse chance of planning for business projects.
MC algo 8-18 Valuing Stock Asonia Co. will pay a dividend of $5.10, $9.20, $12.05, and $13.80 per share for each of the next four years, respectively. The company will then close its doors. If investors require a return of 9.4 percent on the company's stock, what is the stock price?
a. $3708
b. $32.88
c. $42.38
d. $3119
e. $35.41
Answer:
d. $31.19
Explanation:
The computation of the stock price is shown below
Stock Price is
= [$5.10 ÷ (1 + 0.094)^1 + $9.20 ÷ (1 + 0.094)^2 + $12.05 ÷ (1 + 0.094)^3 + $13.80 ÷ (1+0.094)^4]
= $4.66 + $7.69 + $9.20 + $9.63
= $31.19
hence, the option d is correct
Prompt
Suppose you have a friend who says she does not need any resources or career experience before selecting a career, be...
Answer:
Could you please be specific with your question?
Explanation:
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The break-even point in sales dollars is $_____________.
Answer: $75000
Explanation:
In order to solve the question, firstly we need to calculate the contribution margin ratio which will be:
= ($10 - $6) / $10
= 40%
Then, the break even sales will then be:
= Fixed cost / Contribution margin ratio
= $30000 / 40%
= $75000
Therefore, the break-even point in sales dollars is $75000
role of microfinance institutions in national development
Answer:
Thus, micro-finance has become one of the most effective interventions for economic empowerment of the poor. Microfinance is an economic development approach that involves providing financial services, through institutions, to low-income clients, where the market fails to provide appropriate services (Kumudini, 2015).
State 3 arguments in favor of protectionism (in favor of trade restrictions). Please state your own opinion about the validity of each one and whether you support such argument.
Answer: See explanation
Explanation:
Protectionism refers to the restriction of international trade by the government in order to help the domestic industries. The argument in favor of protectionism include:
• Protection of infant industries: Protectionism protects infant industries as they're protected from being subjected to unfair competition and therefore allowed to thrive.
• To prevent dumping and unfair competition
• Revenue generation for government: Through the imposition of tariffs and other policies by the government to protect domestic industries, the government also generates revenue which can be used to improve the economy.
I believe the arguments are valid and I support them.
Ryan bought a stock three years ago for $6 a share. Today, June 22, the stock is selling for $72 a share. Ryan is afraid that the price will fall and does not want to lose his profits so he places a stop-loss order to sell at $70. The stock sells between $71 and $75 throughout the remainder of the day on June 22. On the morning of June 23, the stock opens at $9 a share based on rumors of a possible bankruptcy due to inappropriate accounting procedures. Which one of the following statements is true concerning this situation?
a. Ryan was able to sell his stock for $70 a share thereby protecting his profits.
b. Ryan's stock was sold for $9 a share causing him to lose most of his profits.
c. Ryan still owns his shares of stock since his order was never executed at the $70 price.
d. Ryan received a call from the specialist asking him what he wanted to do about his order.
Answer:
B) Ryan's stock was sold for $9 a share causing him to lose most of his profits.
Explanation:
Stop loss order means the limit the loss to the extent investor has opted. Since Ryan placed a stop loss order at $70, so, when the price of the stock starts at $9, the stock would be sold at $9 because it is the next available price to what he placed a stop loss order.
So, the Answer is Ryan stock is sold for $9 a share causing him to lose most of his profits.
TB Problem Qu. 15-131 (Algo) Clayborn Corporation's net cash provided by operating activities... Clayborn Corporation's net cash provided by operating activities was $118,800; its net income was $106,100; its income taxes were $46,900; its capital expenditures were $96,300; and its cash dividends were $30,200. Required: Determine the company's free cash flow. (Negative amounts should be indicated by a minus sign.)
Answer:
See below
Explanation:
Clayborn Corporation
Determination of free cash flow
Free cash flow = Net cash provided by operating activities - Capital expenditure - Cash dividends paid
Free cash flow = $118,800 - $96,300 - $30,200
Free cash flow = -$7,700
Therefore, Clayborn corporation's free cash flow is -$7,700
using the fifo method what is the cost of goods sold in september
Answer:
1805
Explanation:
Number of units sold in September = 160 units
Using the first - In, First out inventory method : assumes that the oldest (first) inventory items have been sold first.
Inventory items will first be sold from April, the May and so on :
Unit price in April = $11 ; Number of items = 115
($11 * 115) = $1265
(160 - 115) = 45 units
This 45 units will be sold at unit price for May :
(45 * $12) = $540
Cost of goods sold in September :
$1265 + $540 = $1805
Borges Machine Shop, Inc., has a 1-year contract for the production of 225,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow:
General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM)
Annual contracted units 225,000 225,000 225,000
Annual fixed cost $125,000 $225,000 $480,000
Per unit variable cost $15.00 $14.00 $13.00
The option GPE is best when the contracted volume is below:__________
Answer:
For 225,000 units FMS is the best alternative.
For GPE: TC
GPE
[tex]= $100,000 + ($15.00\times 225,000)\\\\= $3,475,000[/tex]
For 0 units GPE has the lowest TC. The next lowest cost is FMS.
x = ($200,000-$100,000)/($15-$14) = 100,000
Therefore, for 0 to 100,000 units GPE is the best alternative.
Explanation:
Formula used:-
For 225,000 units FMS is the best alternative.
Total Cost (TC) = Fixed Cost (FC) + [Variable Cost (VC) x Annual Contract Units (ACU)]
For GPE: TC
GPE
[tex]= $100,000 + ($15.00\times 225,000)\\\\= $3,475,000[/tex]
For FMS: TC
FMS
[tex]= $200,000 + ($14.00\times 225,000)\\\\= $3,350,000[/tex]
For DM: TC
DM
[tex]= $480,000 + ($13.00 \times225,000)\\\\= $3,405,000[/tex]
For 0 units GPE has the lowest TC. The next lowest cost is FMS. Comparing these two plans, let x be the no of units when the cost of both plans is the same.
x = ($200,000-$100,000)/($15-$14) = 100,000
Therefore, for 0 to 100,000 units GPE is the best alternative
Similarly comparing FMS and DM to find x, we get
x= ($ 480,000-$ 200,000)/($14-$13) = 280,000
So, for the 225,000 and 280,000 range, FMS is the best alrernative.
For greater than 280,000 DM is the best alternative.
The option GPE is best when the contracted volume is below 100,000 units
The option FMS is best when the contracted volume is between 100,000 and 280,000 units (enter your response as a whole number)
The option DM is best when the contracted volume is over 280,000 units (enter your response as a whole number)