Answer:
$339,160
Explanation:
The computation of the cost of goods manufactured is shown below:
Cost of goods manufactured is
= Material used in product + Labor costs of assembly line workers + Factory overheads + Opening Work in process – Closing Work in process
where,
Factory overheads is
= Depreciation on plant+ Property taxes on plant+ Factory supplies used
= $64,600 + $8,160 + $28,700
= $101,460
Now put all other values together with this in the above formula
So,
= $129,100 + $111,300 + $101,460 + $14,000 - $16,700
= $339,160
If a firm is a price taker in both the labor market and the output market, it will:______.a. exceeds the marginal revenue product of labor.b. equals the marginal revenue product of labor.c. is less than the marginal revenue product of labor.d. equals the marginal physical product of labor.
Answer:
(C)
Explanation:
First, what does it mean for a firm to be a price-taker and then in 2 market places?
If a firm is a price-taker, this means that the firm accepts the price presented by the other group. The other group in this case is either laborers (labor market) or customers/other firms (output market).
A firm that is a price-taker does not set or use its own desired price and this is usually for business reasons.
The labor market is a resource market; since labor is one of the resource inputs or factors used in production.
A price-taker firm in the labor market is one that accepts the price at which labor(ers) chooses to work. This price could be lower or higher than what the firm is willing and able to pay.
The output market is the market for buying and selling of finished or semi-finished goods/products. It is the final market; where manufactured goods are made available to their various consumers.
A price-taker firm in the output market is one that accepts the price set by other firms in the industry or the price agreed upon by consumers. Again, this price could be higher or lower than the price at which the producer is willing to give the product away.
Now, what happens to the income statistics of firm that is a price-taker in both the labor market and the output market?
The firm will be running on less than the marginal revenue product of labour.
The flow rate of customers at a state fair is 100 per hour. The fair is open from 8 a.m. to 8 p.m. How many customers come through the fair during that time?
Answer:
1,200 customers
Explanation:
Calculation for how many customers come through the fair during that time
Based on the information given about the time the fair is open, we were told that they do open from 8am in the morning to 8pm in the night which means that 8am to 8pm will give us 12 hours
Now let calculate for the numbers of customers that come through the fair during that time Using this formula
Numbers of customers =Flow rate of customers per hr×Numbers of hours
Let plug in the formula
Numbers of customers =100 customers per hr x 12 hrs
Numbers of customers == 1,200 customers
Therefore the numbers of customers that come through the fair during that time will be 1,200 customers.
Two countries can gain from specialization and trade as long as they have different opportunity costs in the production of some goods.a) trueb) false
Answer:
True
Explanation:
the country with the lower opportunity cost in producing a good is more efficient in production and should specialise in production of that good. While the country with the higher opportunity cost is inefficient in the production of the good and should import from the country with the lower opportunity cost.
Let's illustrate with an example
Scenario A
Country X's opportunity cost in the production of good A = 12 units of B
Country Y's opportunity cost in the production of good A = 2 units of B
Country Y is more efficient and should specialise in the production of good A
Scenario B
Country X's opportunity cost in the production of good A = 12 units of B
Country Y's opportunity cost in the production of good A = 12 units of B
Both countries have the same opportunity cost, so, we can't decide which country should specialise
Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows.(a) Indicate the missing amount. Case 1 2Direct materials used $9,700 $Direct labor 5,100 8,100Manufacturing overhead 8,400 4,100Total manufacturing costs 16,100Beginning work in process inventory 1,100 Ending work in process inventory 3,100Sales revenue 25,000 Sales discounts 2,600 1,500Cost of goods manufactured 17,100 22,100Beginning finished goods inventory 3,400Goods available for sale 22,100 Cost of goods sold Ending finished goods inventory 3,500 2,600Gross profit 7,100Operating expenses 2,800 Net income 5,100
Answer:
Incomplete manufacturing costs:
Case 1 Case 2
Direct materials used $9,700 $3,900
Direct labor 5,100 8,100
Manufacturing overhead 8,400 4,100
Total manufacturing costs 23,200 16,100
Beginning work in process inventory 1,100 9,100
Ending work in process inventory 7,200 3,100
Sales revenue 25,000 31,500
Sales discounts 2,600 1,500
Cost of goods manufactured 17,100 22,100
Beginning finished goods inventory 5,000 3,400
Goods available for sale 22,100 25,500
Cost of goods sold 18,600 22,900
Ending finished goods inventory 3,500 2,600
Gross profit 3,800 7,100
Operating expenses 2,800 2,000
Net income 1,000 5,100
Explanation:
To work out the missing figures involves some manoeuvres of the figures, working up or down as the case may be. For example, to calculate the cost of goods sold in Case 1, I deducted the ending inventory of finished goods from the Goods available for sale. With this figure, it becomes possible to work out the Gross profit and the Net income.
In the month of June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales. Instructions:A. Determine the contribution margin in dollars, per unit, and as a ratio.B. Compute the break-even point in units and dollars.C. How much can sales decline before Bedford Company experiences a loss? D. What would be the sales dollars and number of units sold if Bedford Company wishes to have a target profit of $4,000?
Answer:
Results are below.
Explanation:
Giving the following information:
In June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales.
First, we need to calculate the unitary variable cost:
Unitary variable cost= 34*0.4= $13.6
Now, we can determine the contribution margin per unit and the contribution margin ratio:
contribution margin per unit= selling price - unitary variable cost
contribution margin per unit= 34 - 13.6= $20.4
contribution margin ratio= contribution margin per unit/selling price
contribution margin ratio= 20.4/34
contribution margin ratio= 0.6
To calculate the break-even point in units and dollars, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 6,320/20.4
Break-even point in units= 310 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 6,320/0.6
Break-even point (dollars)= $10,533
To calculate the margin of safety, we will use the following formula:
Margin of safety= (current sales level - break-even point)
Margin of safety= 350*34 - 10,533
Margin of safety= $1,367
Finally, the desired profit is $4,000:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (6,320 + 4,000) / 20.4
Break-even point in units= 506 units
Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio
Break-even point (dollars)= 10,320/0.6
Break-even point (dollars)= $17,200
The following information was reported in the December 31, 2012, financial statements of Southeast Airlines, Inc. (listed alphabetically, amounts in millions).Accounts Payable $4,155Accounts Receivable 700Aircraft Fuel Expense 9,900Cash 3,090Common Stock 1,280Dividends 15Equipment 15,810Income Tax Expense 310Interest Expense 250Landing Fees Expense 4,300Notes Payable 7,010Repairs and Maintenance Expense 2,400Retained Earnings (as of December 31, 2012) 7,895Salaries and Wages Expense 3,460Supplies 740Ticket Revenues 23,100Prepare an income statement for the year ended December 31, 2012.
Answer and Explanation:
The preparation of the income statement for the year ended Dec 31,2012 is shown below"
Southeast Airlines, Inc.
Income statement
For the year ended December 31, 2012
Revenue
Ticket Revenues $23,100
Total revenues $23,100 (A)
Less: Expenses
Aircraft Fuel Expense $9,900
Income Tax Expense $310
Interest Expense $250
Landing Fees Expense $4,300
Repairs and Maintenance Expense $2,400
Salaries and Wages Expense $3,460
Total expenses $20,620 (B)
Net income $2,480 (A- B)
A plaintiff in a high profile legal suit was offered the following out of court settlement: We the defendent will pay the lump sum of $200 to the plaintiff in exactly 11 years. Or alternatively, we will negotiate a lump sum payment today. According to time value of money, what lump sum amount today will have the same present value as the offered settlement if the interest rate of 4.2%?$______ Place your answer in dollars and cents. Do not include a dollar sign or a comma. Work your analysis out with at least 4 decimal places of accuracy.
For each of the following costs incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object.Cost Cost Object Direct Cost Indirect CostEx. Catered food served to patients A particular patient x 1. The wages of pediatric nurses The pediatric department 2. Prescription drugs A particular patient 3. Heating the hospital The pediatric department 4. The salary of the head of pediatrics The Pediatric department 5. The salary of the head of pediatrics A particular pediatric patient 6. Hospital chaplain's salary A particular patient 7. Lab tests by outside contractor A particular patient 8. Lab tests by outside contractor A particular department
Answer:
1. Direct Cost
2. Direct Cost
3. Direct Costs
4. Direct Costs
5. Indirect Costs
6. Indirect Costs
7. Direct Costs
8. Indirect Cost
Explanation:
A cost object is where costs accumulates and the value needs to be determined.
Before classifying costs as direct or indirect it is very important to identify the cost object.
Direct costs can be traced directly through observation on the cost object whilst the Indirect costs can not be trace directly to the cost object.
A company that loans money to an organization is a(n):______.a. supplier.b. lender.c. shareholder.d. investor.
Answer:
lender.
Explanation:
A lender is an individual or company that makes funds available another com[any. Lenders receive fixed payments based on a predetermined rate at an agreed time.
A shareholder is the owner of a company. A shareholder is a person who buys the stock of a publicly traded company
Supplier provides raw materials needed for production to a company
An investor can either be a lender or shareholder
Investment company advertising is prohibited from showing:_______
Answer: performance projections
Explanation:
Investment company advertising is prohibited from showing performance projections.
In 1994, The Securities and Exchange Commission approved amendments that hinders the members from using rankings in investment company in sales literature and advertisements unless some particular requirements are being met.
Workplace technology is relied upon by businesses to increase _____________. Employee turnover Philanthropy Efficiency and effectiveness Malfunction and futility
Answer:
Workplace technology is relied upon by businesses to increase _____________.
Efficiency and effectiveness
Explanation:
Workplace technology including the use of computer systems, internet, and other communication and information devices has propelled manufacturing and eased communication. Technology has exponentially improved the rate of production and speed at which business occurs. Technology in the workplace has helped factory and administrative workers to become more efficient than ever before with the automation of the many processes. As efficiency is increased, so has effectiveness in the production of desired results been improved tremendously. For instance, a process or set of processes that used to take hours now can take only minutes.
The mission of the National Association of Advertising (NAA) is to improve and strengthen the ad agency business, to advocate advertising, to influence public policy, to resist advertising-related legislation that it regards as unwise or unfair, and to work with government regulators to achieve desirable social and civic goals
a. True
b. False
Answer: False
Explanation:
The above statement is wrong as the function described is that of the American Association of Advertising Agencies which is a trade association for the advertising agencies in the United States.
The goal of the American Association of Advertising Agencies is to strengthen and also improve advertising agency business and to also help its member agencies to enjoy more profit and be more effective and efficient.
The primary functions of accounting are to:_________
Answer:
c. measure a company's activities.
e. communicate information to decision makers.
Explanation:
Accounting's main purpose is to record the activities of a company because record keeping is very important as it primarily shows whether the company is making a profit or a loss.
The records can then be submitted to decision makers and stakeholders who will then use the information given to guide decisions that they will make for themselves, the company or both.
A company offers ID theft protection using leads obtained from client banks. Three employees work 40 hours a week on the leads, at a pay rate of $19 per hour per employee. Each employee identifies an average of 4,100 potential leads a week from a list of 5,000. An average of 5 percent of potential leads actually sign up for the service, paying a one-time fee of $70. Material costs are $1,400 per week, and overhead costs are $9,300 per week.
Calculate the multifactor productivity for this operation in fees generated per dollar of input. (Round your answer to 2 decimal places.)
Answer:
3.32
Explanation:
The computation of the multifactor productivity is shown below:
As we know that
Multifactor productivity = Output ÷ Input
where,
Output = (possible leads × no of workers × fee × Conversion percentage)
= 4100 × 3 × 70 × 5%
= $43050
And,
Input is
= Labor cost + Material cost + Overhead cost
where,
Labor cost = 3 × 40 × 19
= $2,280
Material cost = $1,400
And,
Overhead cost = $9,300
So,
Input = $2,280 + $1,400 + $9,300
= $12,980
Now
Multifactor productivity is
= $43,050 ÷ $12,980
= 3.32
the rise and fall of the surface of the ocean is called
the rise and fall on a ocean is called a ' tide '
Give an example of something that is good for one person and bad for someone else.
Answer: Cigarette smoking
Explanation:
Utility is simply defined as the satisfaction or the enjoyment that an individual gets when the individual consumes a particular good.
An individual who smoked cigarette derives satisfaction from it and gets value for his or her money, therefore it's good for him or her. But in the case of someone who doesn't smoke, the person will see cigarette as something bad because it gives disutility to him or her.
The primary source of information to be reported about litigation, claims, and assessments is the:_________
Answer:
Client's management
Explanation:
Client's management in business can be explained as the act of maintaining the positive relationship between the client and the company in order to have a productive interaction so that the company can deliver the quality of service required by the client and for lasting relationship between them.
This is important in business to keep your client from getting their service/ product elsewhere. It should be noted that the primary source of information to be reported about litigation, claims, and assessments is the Client's management
CVP analysis can be used to study the effect of:________a. changes in selling prices on a company's profitability.b. changes in variable costs on a company's profitability.c. changes in fixed costs on a company's profitability.d. changes in product sales mix on a company's profitability.e. All of the answers are correct.
Answer:
e. All of the answers are correct.
Explanation:
Cost Volume Profit (CVP) analysis involves a model of the relations amont the prices of the products, the volume or level of activity, unit variable costs, and the sales mix. The model is used to predict the impact on the profits of changes in those parameters. It is used to study the effects of changes in selling prices on a company's profitability, changes in variable costs on a company's profitability, changes in fixed costs on a company's profitability, and changes in product sales mix on a company's profitability
Perpetual Inventories The following summary data are from the job order cost sheets of Castle Company: Dates Total costs Assigned Total Production Job Started Finished Shipped at September 30 Costs Added in October 1 9/10 9/20 10/11 $9,000 2 9/17 9/29 10/22 6,600 3 9/25 10/11 10/27 3,500 $7,100 4 9/27 10/19 11/4 4,400 5,700 5 10/14 11/10 11/18 3,200 6 10/23 11/17 11/29 4,900 Using the above data,
compute:
(a) the finished goods inventory at October 1 and October 31,
(b) the work in process inventory at October 1 and October 31, and
(c) the cost of goods sold for October. Castle began operations with Job 1.
a. Finished goods inventory at October 1: ____________
Finished goods inventory at October 31: _____________
b. Work in process inventory at October 1: ___________
Work in process inventory at October 31: ____________
c. Cost of goods sold for October:__________
Answer and Explanation:
The computation of each point is shown below:-
a. The finished goods inventory at October 1 = $9,000 + $6,600
= $15,600
the finished goods inventory at October 31 = $4,400 + 5,700
= $10,100
b. the work in process inventory at October 1 = $3,500 + $4,400
= $7,900
the work in process inventory at October 31 = $3,200 + $4,900
= $8,100
c. the cost of goods sold for October.
Castle start operations with Job 1
= $9,000 + $6,600 + $3,500 + $7,100
= $26,200
Although Janet has a Director (Communications) role within Zenith Fine Furnishings for the special project she is working on, her responsibilities include dealing directly with non-management employees and essentially acting as a liaison between management and non-management employees. These responsibilities indicate Janet is serving at which level of management?
a. top-level managet
b. middle-level manager
c. executive manager
d. frontline manager
e. strategeic manager
Answer: b. middle-level manager
Explanation: Middle level managers act as intermediate between the workers and the exec utives as evident in some of the responsibilities of Janet which include: dealing directly with non-management employees and essentially acting as a liaison between management and non-management employees. They are subordinate to and accountable to the senior management but above the lowest levels of operational workers to whom they provide guidance and inspiration to. These thus, is an indication that Janet is serving at the middle-level manager level of management.
The account balances of Wilson Towing Service at June 30, 2016, follow:Equipment $12,950Office supplies 1,000Notes payable 4,500Rent expense 500Cash 1,400Dividends 5,500Service revenue 12,500Accounts receivable 8,000Accounts payable 10,000Retained earnings June 1, 2016 5,900Salaries expense 2,500Common stock 2,000Required:1. Prepare the income statement for Wilson Towing Service for the month ending June 30, 2016.2. What does the income statement report?
Answer:
Wilson Towing Service
Income Statement
For the month ending June 30, 2016
Service revenue $12,500
Salaries expense ($2,500)
Rent expense ($500)
Operating profit $9,500
The income statement tells us how much profit/loss did a business make during a certain period of time. In this case, the operating profit was $9,500. In order to calculate net income we would need to subtract taxes but we are not given the tax rate or the taxes due.
Use the expanded accounting equation to compute the missing financial statement amounts.CompanyAssets.=Liability+Owner capital -Owner withdrawals+ Revenues- Expenses1. $64,000 $22,000 $32,000 $0 $? $14,0002. $102,800 $38,000 $56,000 $? $36,000 $24,000What is the revenues amount for company 1 and the owner withdrawals for company 2?
Answer:
1. $24,000
2. $3,200
Explanation:
1. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
64,000 = 22,000 + 32,000 - 0 + revenues - 14,000
Revenue = 64,000 - 22,000 - 32,000 + 14,000
Revenue = $24,000
2. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
102,800 = 38,000 + 56,000 - withdrawals + 36,000 - 24,000
-Withdrawals = 102,800 - 38,000 - 56,000 - 36,000 + 24,000
-Withdrawals = -$3,200.
Withdrawals = $3,200
1. The revenue amount for company 1 is $24,000
2. The owner withdrawals for company 2 is $3,200
The calculation is as follows:
1. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
64,000 = 22,000 + 32,000 - 0 + revenues - 14,000
Revenue = 64,000 - 22,000 - 32,000 + 14,000
Revenue = $24,000
2. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
102,800 = 38,000 + 56,000 - withdrawals + 36,000 - 24,000
-Withdrawals = 102,800 - 38,000 - 56,000 - 36,000 + 24,000
-Withdrawals = -$3,200.
Withdrawals = $3,200
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The journal entry to record a credit sale is:______.a) cash; service revenue.
b) accounts receivable: sales.
C) accounts receivable: sales return and allowances.
d) cash; sales.
Answer:
b) accounts receivable: sales.
Explanation:
When sales are made on credit, no cash is received, hence, the appropriate entries would be to record expectation of future cash receipt by debiting accounts receivable while sales revenue is credited because sales are recorded when entity has delivered goods to the customer and not necessarily when cash in respect of the sales has been received
The following transactions were incurred by Stoncius Fabricators during January, the first month of its fiscal year. i (Click the icon to view the transactions) Requirements 1. Record the proper journal entry for each transaction 2. By the end of January, was manufacturing overhead overallocated or underallocated? By how much? a. $170,.000 of materials was purchased on account. Record the entry (Record debits first, then credits. Exclude explanations from any journal entries.) Journal Entry Date Accounts Credit a. Raw Materials Inventory Accounts Payable 170000 170000 b. $162,000 of materials was used in production, of this amount, $143,000 were used on speciffe obs. Record the entry. ournal Entry Date Accounts Debit Credit b. Work in Process Invento Manufacturing Overhead Raw Materials Inventory 143000 19000 162000 c. Manufacturing labor and salaries for the month totaled $220,000. A total of $200,000 of manufacturing labor and salaries was traced to specific jobs, and Journal Entry Date Accounts Debit Credit
Answer:
Journal entries are given
Explanation:
Raw materials used for special jobs will be allocated to work in process and the remaining used in production will be allocated to manufacturing overhead.
Requirement 1
A (Materials was purchased on account)
DEBIT CREDIT
Raw Material Inventory $170,000
Accounts Payable $,170,000
B (Materials was used in production)
DEBIT CREDIT
Work In process Inventory $143,000
Manufacturing Overhead $19,000
Raw Material Inventory $162,000
C (Manufacturing labor and salaries for the month)
DEBIT CREDIT
Work In process Inventory $200,000
Manufacturing Overhead $20,000
Wages payable $220,000
Requirement 1
There NO such information available in the question to determine whether manufacturing overheads are over-allocated or under-allocated.
Opportunity costs may be viewed only in terms of financial resources.a) trueb) false
Answer:
b) false
Explanation:
Opportunity costs can also be viewed in terms of personal preferences or satisfaction. E.g. a person could legally work all day and all night. Of course no one can actually work that much, but it is possible to work between 16 - 18 hours per day. But by doing so, you will have to lose certain personal benefits like spending time with your family, girl/boy friend, doing things that entertain you, or even going to church if you are very religious (and many other things). People value their personal activities in a different way, and will decide what to do depending on which activity they value most.
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $168,120. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $22,500 at the beginning of each period Economic life of asset 2 years Fair value of asset $168, 120 Implicit interest rate (Also lessee's incremental borrowing rate) 88 Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
Complete Question
The complete question is shown on the first uploaded image
Answer:
Now the calculation of this question and its solution is shown on the second and third uploaded image
Explanation:
For this question we will be making use of the excel formula
Now note since the installment is paid at the beginning of each quarter, there will be no interest charged in the first quarter and the whole amount paid will be adjusted against the outstanding lease balance.
The Mugger sells three types of mugs, flowers, dogs, and sports. The following information is available: Flowers Dogs Sports Total Sales Volume 25,000 100,000 50,000Selling Price $20 $25 $10Variable cost per unit 10 20 6Total fixed costs $500,000 REQUIRED: 1. What is the breakeven point for The Mugger? 2. Would you recommend promoting the change in product mix to 4 to 2 to 1 of flower mugs, dog mugs, and sports mugs? Why?
Answer:
See answer below
Explanation:
1. The break even point for flowers = Fixed costs / Contribution margin
Where contribution margin = Selling price per unit - Variable cost per unit
= $500,000 / ($20 - $10)
= $500,000 / $10
= 50,000 units
Therefore,
Break even point for the Mugger is 50,000 units.
Break even points for Dogs = Fixed costs ÷ Contribution margin
= $500,000 / ($25 -$20)
= $500,000 / $5
= 100,000 units
Break even points Sports = Fixed costs / Contribution margin
= $500,000 / ($10 - $6)
= $500,000 / $4
= 125,000 units
2. I can recommend that the mugger should change its product mix from 1:4:2 (Flowers, dogs, sports) to 4:2:1 (Flowers , dogs , sports)
• Because there is an increase in the break even points for each of the mugger.
A registered investment adviser and its representatives have been registered in a State for the past 5 years. The current registration manager of the adviser resigns in November and the firm retains an executive search firm to find a new registration manager. The position is filled in June of the following year and the new registration manager finds that registration renewals has not been filed. Which statement is TRUE?
a. The registered investment adviser must re-register in the State, but not the investment adviser representatives
b. The investment adviser representatives must re-register in the State, but not the investment adviser
c. Both the investment adviser and the investment adviser representatives must re-register in the State
d. Neither the investment adviser nor the investment adviser representatives are required to re-register in the State
Based on the given information, the statement which is true is Neither the investment adviser nor the investment adviser representatives are required to re-register in the State. Thus the correct option is D.
What is a manager?
A manager refers to a person who is responsible head of any project and helps in arranging the resources, checking the progress, and timely completion of it in order to achieve the vision and goal of the organization.
In the given case, it is explained that For the last five years, a registered investment adviser and its agents have been registered in a State. The adviser's existing registration manager resigns in November, and the company hires an executive search agency to locate a replacement.
The State does not need the investment adviser or the investment adviser representatives to re-register according to the given information.
Therefore, option D is appropriate.
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A new furnace for your small factory will cost $45,000 and a year to install, will require ongoing maintenance expenditures of $1,400 a year. But it is far more fuel-efficient than your old furnace and will reduce your consumption of heating oil by 4,200 gallons per year. Heating oil this year will cost $2 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years, at which point it will need to be replaced and will have no salvage value. The discount rate is 12%.a. What is the net present value of the investment in the furnace?b. What is the IRR? (Do not round intermediate calculations.c. What is the payback period? (Do not round intermediate calculations.d. What is the equivalent annual cost of the furnace? (Do not round intermediate calculations.e. What is the equivalent annual savings derived from the furnace?f. Compare the PV of the difference between the equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger?
Answer:
a) NPV = $43,874.65
b) IRR = 24.37%
c) payback period = 5.33 years
d) equivalent annual cost = $6,024.55
e) equivalent annual savings = $13,298.61
f) since the NPV is positive, the equivalent annual savings must be higher than the equivalent annual costs
Explanation:
initial outlay year 0 = -$45,000
net savings year 1 = -$1,400 + (4,200 x $2) = $7,000
net savings year 2 = -$1,400 + (4,200 x $2.50) = $9,100
net savings year 3 = -$1,400 + (4,200 x $3) = $11,200
net savings years 4 - 20 = -$1,400 + (4,200 x $3.50) = $13,300
discount rate = 12%
using a financial calculator:
NPV = $43,874.65
IRR = 24.37%
payback period = 5.33 years
equivalent annual cost = (present value of costs x 12%) / / [1 - (1 + 12%)⁻ⁿ] =[($45,000 + $10,457.22) x 12%] / [1 - (1 + 12%)⁻ⁿ] = $6,654.87 / 0.89633 = $7,424.57
equivalent annual savings = (present value of savings x 12%) / / [1 - (1 + 12%)⁻ⁿ] = ($99,332.87 x 12%) / / [1 - (1 + 12%)⁻ⁿ] = $11,919.94 / 0.89633 = $13,298.61
If the optimal production lot size decreases, average inventory increases. A. TrueB. Fasle
Answer:
A. True
Explanation:
If the optimal production decreases than the average inventory will increase.