Answer: $1,175,000
Explanation:
Cost of ending inventory December 31, 2021;
= December 2019 ending inventory + {(Inventory at 2021 price/2021 index * 2019 index) - December 2019 ending inventory} * 2021 index / 2019 index
= 1,100,000 + {(1,450,000/125 * 100) - 1,100,000} * 125/100
= 1,100,000 + 75,000
= $1,175,000
R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each time he places an order, what would the total annual holding cost be
Answer:
$1,200
Explanation:
total annual holding cost = average number of units in inventory x annual holding cost per unit
average number of units in inventory = 500 units / 2 = 250 unitsannual holding cost per unit = $48 x 10% = $4.8total annual holding cost = $4.80 x 250 units = $1,200
Total annual holding cost per unit includes all the costs associated to keeping a certain inventory level, e.g. warehouse costs like rent and utilities, salaries of hte employees that work in the warehouse, insurance, etc.
Select the correct answer
What does the term constructed wetlands normally refer to
A natural wetlands that are used for wastewater disposal and treatment
B. wetlandis created for the purpose of environmental research
Cartificially created wetlands that simulate natural wetlands
D. wetlands used for constructing buildings
Reset
Net
Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow at the rate of 11% per year. The risk-free rate of return is 8%, and the expected return on the market portfolio is 18%. The stock of Todd Mountain Development Corporation has a beta of 0.80. Using the constant-growth DDM, the intrinsic value of the stock is _________. Multiple Choice 8.80 11.11 27.27 60.00
Answer:
the intrinsic value of the stock is $60
Explanation:
The computation of the intrinsic value of the stock is as follows:
But before that the cost of equity is
The Cost of Equity is
= Risk Free Rate + Beta × (Market Return - Risk Free Rate)
= 8% + 0.80 × (18% - 8%)
= 16%
Now
Intrinsic Value is
= Next year Dividend ÷ (Rate of Return - Growth rate)
= $3 ÷ (16% - 11%)
= $60
hence, the intrinsic value of the stock is $60
Adelberg Company has two products: A and B. The annual production and sales of Product A is 1,900 units and of Product B is 1,300 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The total estimated overhead for next period is $101,075. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and Order Size--with estimated overhead costs and expected activity as follows:
Expected Activity
Activity Cost Pools Estimated Overhead Costs $ Product A Product B Total
Activity 1 $31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
Order size 15,476 200 200 400
Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate under the traditional costing system is closest to:________
a. $11.71 per DLH
b. $38.69 per DLH
c. $171.89 per DLH
d. $23.87 per DLH
Answer:
$60.53 per DLH
Explanation:
Calculation for what the predetermined overhead rate under the traditional costing system is closest to:
First step is to calculate the Direct Labor hours each product
Using this formula
Direct Labor hours=Annual production and sales*Direct Labor hour per unit
Direct Labor hours for Product A=1,900 units*0.4 direct labor-hours per unit
Direct Labor hours for Product A=760
Direct Labor hours for Product B=1,300 units*0.7 direct labor-hours per unit
Direct Labor hours for Product A=910
Second step is to calculate the Total Direct Labor hours for Product for Product A and Product B
Product A and B Total Direct Labor hours for Product =760+910
Product A and B Total Direct Labor hours for Product=1,670
Now let calculate the predetermined overhead rate under the traditional costing system using this formula
Predetermined overhead rate =Estimated Overhead/Activity base(Direct Labor Hours)
Let plug in the formula
Predetermined overhead rate=$101,075/1,670
Predetermined overhead rate=$60.53 per DLH
The predetermined overhead rate under the traditional costing system is closest to:$60.53 per DLH
All employees of United Company are covered by a group hospitalization insurance plan, but the employees must pay the premiums ($8,000 for each employee). None of the employees has sufficient medical expenses to deduct the premiums. Instead of giving raises next year, United is considering paying the employee's hospitalization insurance premiums. If the change is made, the employee's after-tax and insurance pay will:
Answer:
a.Increase more for the higher income (35% marginal tax bracket) employees.
Explanation:
As in the question it is mentioned that the United company will pay the premium of $8,000 on behalf of each employee so it would be compensated from the salary of the employee and it could be comes under the taxable income
Therefore as per the given options, the option a is correct as it would be taxed at 35% tax rate from the salaries of the employees
Therefore all the other options are incorrect
An asset was purchased for $147,000.00 on January 1, Year 1 and originally estimated to have a useful life of 8 years with a residual value of $8,500.00. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $3,000.00. Calculate the third-year depreciation expense using the revised amounts and straight line method.
Answer: $27,343.75
Explanation:
The original yearly depreciation was ;
= (147,000 - 8,500) / 8
= $17,312.50
Value at beginning of Year 3;
= Cost - Accumulated depreciation
= 147,000 - (17,312.50 * 2)
= $112,375
Using the new figures, depreciation per year is now;
= (112,375 - 3,000) / 4
= $27,343.75
One week, Rachel earned $250. She spent $120 on food, $30 on miscellaneous items, and saved the rest. If Rachel makes a pie chart showing how she spends her money, the central angle for the food sector would be __________.
360° = $250
? =.$120
120×360= 43200
43200÷250
=172.8°
Dukelow Corporation has two divisions: the Governmental Products Division and the Export Products Division. The Governmental Products Division's divisional segment margin is $41,300 and the Export Products Division's divisional segment margin is $93,700. The total amount of common fixed expenses not traceable to the individual divisions is $106,800. What is the company's net operating income (loss)?
a) $241,800
b) $135,000
c) $28,200
d) $135,000
Answer:
c) $28,200
Explanation:
Calculation for What is the company's net operating income (loss)
Governmental products division's divisional margin segment $41,300
Add Export Products Division's divisional segment margin $93,700
Total divisional segment margin $135,000
($41,300+$93,700)
Less Common fixed expenses not traceable to the individual divisions ($106,800)
Company's net operating income $28,200
($135,000-$106,800)
Therefore the company's net operating income is $28,200
The short-run economic outcome resulting from the increase in production costs is known as . Now suppose that the government immediately pursues an accommodative policy by increasing government purchases in response to the short-run economic impact of the severe weather. In the long run, when the government pursues accommodative policy, the output in the economy will be $ billion and the price level will be .
Answer:
The short-run economic outcome resulting from the increase in production costs is known as - Stagflation
Stagflation is a situation in which there is high inflation and high unemployment. In Stagflation, aggregate demand is constricted due to the high costs of goods and services because of an increase in firms' production costs.
Now suppose that the government immediately pursues an accommodative policy by increasing government purchases in response to the short-run economic impact of the severe weather. In the long run, when the government pursues accommodative policy, the output in the economy will be $ billion and the price level will be .
If the government pursues an accommodative policy, also known as an expansionary policy, both the output of the economy and the price level will increase in comparison to the previous numbers.
However, hopefully the level of output will increase proportionally more than the price level, because otherwise, the economic growth will be accompanied by high inflation, leading to an overheated and dysfunctional economy.
Problem 8-2A Record notes payable and notes receivable (LO2)
[The following information applies to the questions displayed below.]
Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $40.6 million cash on October 1, 2015, to provide working capital for anticipated expansion. Precision signs a one-year, 8% promissory note to Midwest Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.
1. Prepare the journal entries on October 1, 2015, to record the issuance of the note.
2. Record the adjustment on December 31, 2015.
3. Prepare the journal entry on September 30, 2016, to record payment of the notes payable at maturity
Answer:
1. Prepare the journal entries on October 1, 2015, to record the issuance of the note.
Journal entry for Precision Castparts
Dr Cash 40,600,000
Cr Notes payable 40,600,000
Journal entry for Midwest Bank
Dr Notes receivable 40,600,000
Cr Cash 40,600,000
2. Record the adjustment on December 31, 2015.
Journal entry for Precision Castparts
Dr Interest expense 812,000
Cr Interest payable 812,000
Journal entry for Midwest Bank
Dr Interest receivable 812,000
Cr Interest revenue 812,000
3. Prepare the journal entry on September 30, 2016, to record payment of the notes payable at maturity
Journal entry for Precision Castparts
Dr Notes payable 40,600,000
Dr Interest expense 2,436,000
Dr Interest payable 812,000
Cr Cash 43,848,000
Journal entry for Midwest Bank
Dr Cash 43,848,000
Cr Notes receivable 40,600,000
Cr Interest receivable 812,000
Cr Interest revenue 2,436,000
During 2021, its first year of operations, Ashbaugh Industries recorded sales of $21,000,000 and experienced returns of $1,400,000. Returns are accounted for as they occur, with additional estimated returns accrued at the end of the period. Cost of goods sold totaled $12,600,000 (60% of sales). The company estimates that 8% of all sales will be returned. The year-end adjusting journal entry to account for anticipated sales returns would include a:
Answer:
Credit to refund liability of $280,000.
Explanation:
The year end adjusting entry would be
Sales Return $280,000 ($21 million × 8% - $1,400,000)
Refund Liability $280,000
(Being the anticipated sales return is recorded)
Here the sales return is debited as it increased the sales return and the refund liability is credited as it increased the liabilities
The same is to be considered
When an interviewer introduces a new topic area, she is using a
A trick question
B secondary question
C turn-taking question
D primary question
Newton Manufacturing has 31,000 labor hours available for producing M and N. Consider the following information: Product M Product N Required labor time per unit (hours) 2 3 Maximum demand (units) 6,500 8,000 Contribution margin per unit $ 5 $ 5.70 Contribution margin per labor hour $ 2.50 $ 1.90 If Newton follows proper managerial accounting practices in terms of setting a production schedule, how much contribution margin would the company expect to generate
Answer:
total contribution margin = $68,500
Explanation:
31,000 hours of labor available
Product M Product N
Required labor time per unit (hours) 2 3
Maximum demand (units) 6,500 8,000
Contribution margin per unit $5 $5.70
Contribution margin per labor hour $2.50 $1.90
since the constraint here is the total number of labor hours, the company must first produce the product that generates the highest contribution margin per labor hour = product M.
total units produced of product M = 6,500
total labor hours required = 6,500 x 2 = 13,000
contribution margin product M = 13,000 x $2.50 = $32,500
remaining labor hours = 31,000 - 13,000 = 18,000
total units of product N produced = 18,000 / 6 = 6,000
contribution margin product N= 18,000 x $2 = $36,000
total contribution margin = $68,500
Macmillan Toys Inc. is looking to expand internationally and wishes to develop a new product line that is highly localized while keeping their cost structure below that of their rivals. Macmillan Toys Inc. has been successful with implementing a blue ocean strategy in their main strategic business units and as such wishes to pursue a ________ strategy for their international operations. Multiple Choice transnational multidomestic international global standardization
Answer:
Multi domestic strategy
Explanation:
Blue Ocean strategy is one in which a company puts emphasis on having a product that had more quality than the competition.
This implies that the company can make more profit as consumers are willing not pay higher price for the product.
Macmillan Toys Inc. is looking to expand internationally and wishes to develop a new product line that is highly localized while keeping their cost structure below that of their rivals.
They can do this by adopting the multidomestic strategy.
This strategy is designed to get maximum local response by tailoring the product and marketing approach to the country in which they are selling.
So different countries will have their unique product specifications
Macmillan Toys Inc. has been successful with implementing a blue ocean strategy in their main strategic business units and as such wishes to pursue a Transnational strategy.
What is a Transnational Strategy?A transnational strategy is adopted by businesses that wish to conduct their affairs across various nations.
This strategy ensures that there is cooperation and synergy between all the operational branches of the nation across the world. This strategy will be adopted by Macmillan Toys Incorporated.
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Select the incorrect statement regarding upstream and downstream costs. A. Companies normally incur significant downstream costs. B. To be profitable, companies must recover the total cost of developing, producing, and delivering products. C. Pricing decisions must consider both upstream and downstream costs in addition to manufacturing costs. D. Upstream and downstream costs are reported as product costs on the income statement.
Answer:
D. Upstream and downstream costs are reported as product costs on the income statement.
Explanation:
Downstream cost is the cost that are spend by the company when the process of the production is completed or the product is ready for delivery made to the customers so this cost would be considered as a distribution to the marketing
While on the other hand the upstream cost is the cost i.e. spend prior to the process of the production like buying of the raw material, product design & development etc
So the downstream would not be recorded as a product cost but it would be recorded as a period cost in terms of the selling and marketing expense
Therefore the option D is incorrect
Suppose that there are two types of cars, good and bad. The qualities of cars are not observable but are known to the sellers. Risk-neutral buyers and sellers have their own valuation of these two types of cars
Types of Cars Buyers Valuation Seller Valuation
Good (50% probability) 5,000 4,500
Bad ( 50% probability) 3,000 2.500
When a buyer does not observe the quality, what is the highest price she will offer for a used car if she ignores adverse selection?
A. $2,500
B. $3,000
C. $4,000
D. $4,500
Answer:
C. $4,000
Explanation:
If he buyer does not have complete information about the car's quality, he/she will likely offer the expected value for a car = ($3,000 x 50%) + ($5,000 x 50%) = $4,000 car. In this type of scenarios, sellers of lemons (bad cars) are benefited since they are able to get a higher price, but sellers of goods cars are hurt because buyers assume their cars are bad.
Suver Corporation has a standard costing system. The following data are available for June: Actual quantity of direct materials purchased 35,000 pounds Standard price of direct materials $ 8.00 per pound Material price variance $ 7,000 Unfavorable Material quantity variance $ 7,500 Favorable The actual price per pound of direct materials purchased in June was: Multiple Choice $7.76 per pound $8.00 per pound $8.20 per pound $8.24 per pound
Answer:
$8.20 per pound
Explanation:
The computation of the actual price per pound is shown below:
Material price variance = (Standard price per pound - Actual price per pound) × Actual quantity purchased
-$7,000 = ($8.00 - Actual price per pound) × 35,000
$8.00 - Actual price per pound = -$7,000 ÷ 35,000
Actual price per pound = $8.20 per pound
Hence, the actual price per pound is $8.20 per pound
We simply applied the above formula so that the correct value could come
And, the same is to be considered
which of these statements reflects a long-term goal
A- "I want to be a public relation specialist"
B- " I want to pass my state licensing exam"
C- "I want to enroll in weekend classes"
Answer:
A. "I want to be a public relation specialist"
Explanation:
"I want to be a public relation specialist" of these statements reflects a long-term goal.
What is the statement?Statements are sentences that express a fact, idea, or opinion. Statements do not ask questions, make requests or give commands. They are also not utterances. Statements are sentences that express a fact, idea, or opinion. Statements do not ask questions, make requests or give speech acts. They are also not exclamations.
A corporation or organization's public image is created and maintained by public relations professionals. They produce material, such as press releases and social media posts, that influence public perception of the business or organization and raise brand recognition. statement
This concept is significant to the ethnographic interview process by conducting an ethnographical interview, the interviewer is attempting to gain a good understanding of the social difficulties in which clients and their family units exist and how they perceive and understand those situations.
Therefore, option (A) is correct.
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Portions of the financial statements for Peach Computer are provided below.
PEACH COMPUTER
Income Statement
For the year ended December 31, 2021
Net sales $1,925,000
Expenses:
Cost of goods $1,100,000
sold
Operating expenses 610,000
Depreciation expense 55,000
Income tax expense 45,000
Total expenses 1,810,000
Net income $ 115,000
PEACH COMPUTER
Selected Balance Sheet Data
December 31
Increase (I) or Decrease
2021 2020 (D)
Cash $107,000 $87,500 $19,500 (I)
Accounts receivable 45,500 51,500 6,000 (D)
Inventory 80,000 57,500 22,500 (I)
Prepaid rent 3,500 6,000 2,500 (D)
Accounts payable 50,000 39,500 10,500 (I)
Income tax 5,500 12,500 7,000 (D)
Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)
Answer:
Cash flow from Operating Activities
Net income 115,000
Add Depreciation 55,000
Add Income tax 45,000
Decrease in Accounts receivable 6,000
Increase in Inventory (22,500)
Decrease in Prepaid rent 2,500
Increase in Accounts payable 10,500
Cash Generated from Operations 211,500
Income tax paid (38,000)
Net Cash from Operating Activities 173,500
Explanation :
The operating activities section of the statement of cash flows shows the Cashflow results from the Operating or Normal trading business of the organization.
Perry Freight Co. leased a trailer to Harper Inc. for use in delivering inventory. The finance lease has a 3-year term, 5% implicit rate, and begins on January 1, 2018. The lease requires a down payment of $10,000 and two equal annual lease payments on December 31 of 2018 and 2019. The list price of the trailer on the inception date is $50,000. What is the dollar amount of each annual payment that Perry Freight Co. will receive
Answer: $21512
Explanation:
The dollar amount of each annual payment that Perry Freight Co. will receive will be calculated thus:
Lease Price of trailer = $50,000
Less: Down payment = $10,000
PV = $50,000 - $10,000 = $40,000
The present value will be the value of the annual installments multiplied by the annuity factor. Therefore,
$40,000 = Annual installment × 1.8594
Annual installment = $40,000 / 1.8594
Annual installment = $21512
The dollar amount of each annual payment that Perry Freight Co. will receive is $21512.
Adams Company is a manufacturing company that has worked on several production jobs during the first quarter of the year. Below is a list of all the jobs for the quarter: Job. No. Balance 356 $ 450 357 1,235 358 378 359 689 360 456 Jobs 356, 357, 358, and 359 were completed. Jobs 356 and 357 were sold at a profit of $500 on each job. What is the balance of Sales for Adams Company at the end of the first quarter
Answer: $2,685
Explanation:
For the balance of Sales, look at Jobs that were sold in the first quarter.
Jobs 356 and 357.
They were sold at $500 profit each.
Balance of sales = (450 + 500) + (1,235 + 500)
= $2,685
If you restate a quote in your own words but do not cite your source you can be rightfully accused of
Answer:
correct, you could be accused of plagerism
Ivanhoe purchased a patent from Vania Co. for $1,240,000 on January 1, 2018. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2028. During 2020, Ivanhoe determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020
Answer: $744,000
Explanation:
The amount that should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020 will be:
First, we have to calculate the amortization recorded up to 2019. This will be:
= (1,240,000 / 10) x 2
= 248,000
The we calculate the amortization to be recognized in 2020. This will be:
= (1,240,000 – 248,000) / 4
= 248,000
The amount that should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020 will be:
= 1240000 - 248000 - 248000
= $744,000
***ECONOMICS***Income tax is money that has to be paid to the government based on:
A. the amount of money a person earns.
B. the value of a person's home or land.
C. the cost of a product being purchased.
D. the number of cars a person owns.
Answer:
A: The amount of money a person earns
Explanation:
A-pex
Income tax is one of the most common types of taxes levied by governments around the world. It is usually calculated as a percentage of a person's taxable income, which is the amount of money that a person earns after certain deductions and exemptions have been taken into account.
On what factors does the specific rates depend upon ?The specific tax rates and income brackets vary depending on the country and the tax system in place. Some countries have a progressive income tax system, where the tax rate increases as income increases. Other countries have a flat tax system, where everyone pays the same tax rate regardless of their income.
In many countries, income tax is used to fund public services and programs, such as education, healthcare, infrastructure, and social welfare programs. The revenue generated from income tax is typically the largest source of government revenue in many countries.
In addition to federal or national income tax, many countries also have state or provincial income tax systems that levy additional taxes on top of the federal income tax. Some countries also have various tax credits, exemptions, and deductions that can reduce a person's taxable income and lower their overall tax burden.
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When a cable company is awarded sole possession to franchise in a community, that franchise is now a: Group of answer choices
Answer:
l think lt can be some problems._
Swifty Corporation is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6380000 on March 1, $5270000 on June 1, and $8350000 on December 31. Swifty Corporation borrowed $3240000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6380000 note payable and an 11%, 4-year, $12650000 note payable. What is the actual interest for Swifty Corporation
Answer:
Swifty Corporation
The actual interest for Swifty Corporation is:
$2,418,300
Explanation:
a) Data and Calculations:
Expenditures were
on March 1, $6,380,000
on June 1, $5,270,000
on December 31 $8,350,000
Borrowings:
on January 1 on a 5-year, 12% note = $3,240,000 Interest = $388,800
Note payable, 10%, 3-year = $6,380,000 Interest = $638,000
Note payable, 11%, 4-year = $12,650,000 Interest = $1,391,500
Total interest for Swifty Corporation = $2,418,300
b) Computation of interests:
12% note = $3,240,000 * 12% = $388,800
10% note = $6,380,000 * 10% = $638,000
11% note = $12,650,000 * 11% = $1,391,500
What examples best demonstrate likely tasks for Distribution and Logistics workers? Check all that apply. Stacy supervises workers who create advertising strategies for a company. Mariano creates a website for providing information about a company’s product. Soledad identifies ways to reduce a company’s storage and shipping costs. Thurman researches the potential customers for a company to find out what they want. Portia supervises workers who ship and store products in a warehouse. Denver analyzes the supply chain for a company’s product.
Answer:
the real answer is c,e, and f
Explanation:
your welcome america
The best demonstrate likely tasks for Distribution and Logistics worker are a,c, and f.
What is distribution and logistics management?Distribution and logistics management is a critical company function. It play a key role in fulfilling customer demands, ordering and managing inventory, controlling inbound and outbound shipments, reducing costs, saving time, and meeting company objectives. and vision.
So the correct examples for Distribution and Logistics workers are: Portia supervises workers who ship and store products in a warehouseSoledad identifies ways to reduce a company’s storage and shipping costs. Denver analyzes the supply chain for a company’s product.Learn more about Distribution and Logistics here: https://brainly.com/question/27092762
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Even though the moving averages help highlight the long-run trend of a time series, the moving-average model is not designed for making forecasts in the presence of trends. Explain the reason why we should not rely on moving averages for predicting future observations of a trending series.
Answer:
Moving averages cannot be used to make future forecasts successfully because certain events like demand, supply ,quality and external factors such as competitions cannot be determined with the use of Moving averages, and these factors have a huge impact on prices
Explanation:
Moving averages are generated / obtained using data from events that occurred previously hence they highlight the long-run trend of a time series, but they cannot be used to make future forecasts successfully because certain events like demand, supply ,quality and external factors such as competitions cannot be determined with the use of Moving averages. and these factors have a huge impact on prices
At the beginning of 2017, Wallace Corporation issued 10% bonds with a face value of $6,000,000. These bonds mature in the five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $5,558,400 to yield 12%. Wallace uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2017? (Round your answer to the nearest dollar.)
Answer:
$669,018
Explanation:
The computation of the interest expense reported is shown below:
Date Interest Payment Interest Amortization of Balance Book
(Face Value × Expense [B] Bond Discount value
Coupon Rate (A-B) of
× 1 ÷ 2) [A] Bonds
02-Jan-17 $441,600 $5,558,400
30-Jun-17 $300,000 $333,504 $33,504 $408,096 $5,591,904
(6,000,000 ×10% ×1 ÷ 2) ($5,558,400 × 12% ($441,600 - $33,504)
× 1 ÷ 2) (5,558,400 + 33504)
31-Dec-17 $300,000 $335,514
($6,000,000 × 10% ×1 ÷ 2) ($5,591,904 × 12% ×1 ÷ 2)
The total amount of interest expense is
= $333,504 + $335,514
= $669,018
Corporation makes an extra large part to use in one its fabulous products. A total of 22,000 units of this extra large part are produced and used every year. The company's costs of producing the extra large part at this level of activity are below:
Per Unit
Direct materials $4.70
Direct labor $9.30
Variable manufacturing overhead $9.80
Supervisor's salary $5.20
Depreciation of special equipment $3.60
Allocated general overhead $8.80
An outside supplier has offered to make the extra large part and sell it to for $31.90 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the extra large part 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. In addition, the space used to make the extra large part could be used to make more of one of the company's other fabulous products, generating an additional segment margin of $34,000 per year for that product (Q). What would be the annual financial advantage (disadvantage) for Corp. as a result of buying the extra large part from the outside supplier?
Answer: Financial disadvantage of -$29,800
Explanation:
If extra large part is produced inhouse;
= Direct materials + direct labor + Variable manufacturing overhead + Supervisor's salary + opportunity cost of making other products
= ((4.7 + 9.3 + 9.8 + 5.2) * 22,000) + 34,000
= $672,000
Cost if bought outside;
= 31.90 * 22,000
= $701,800
Financial advantage ( disadvantage) = 672,000 - 701,800
= -$29,800