Answer:
Following are the solution to the given points:
Explanation:
In question 1:
No, airline through Washington to San Fransisco should not continue. It is because the airline could recover its constant but varying expenses, as mentioned in the article. Service would therefore not be able to endure failure. The airline should therefore avoid driving.
In question 2:
To determine whether the airline should close down or not, the US should equate the price with both the Average total cost. Each airline is required to close down its activities if its cost is reduced than AVC. If the price is higher therefore the AVC price will continue. Since, as per the report, the airline cannot also cover its variable costs, its activities must be stopped.
Market researchers often report disposable income. This is your income after tax deductions. Your gross income is $4,000 per month. Your federal tax is 10%, state tax is 7%, city tax is 3%, and you pay 7% to social security. What is your monthly disposable income?
A) $2,000
B) $2,920
C) $3,092
D) $4,022
Answer:
B.) 2,920
Explanation:
The monthly disposable income will be $2,920.Thus the correct option is B.
What is tax?A tax is referred to a certain amount that is collected by the government of any country from its citizens which is later on used in the development process of the country including building, hospitals, roads and maintaining transportation, and so on.
The calculation for monthly disposable income is
Gross payment=$4000
federal tax= 10%
State tax= 7%
city tax= 3%
Social security=7%
These given rates of tax will be multiplied by the Gross income amount-
($4,000 *0.10) = 400
($4,000*0.07) =280
($4,000*0.03) = 120
($4,000*0.07) = 280
The sum of these numbers will be
=400+280+120+280
=$1080
Then this amount will be deducted from the gross income
=$4,000-$1080
=$2920
The disposable income is $2920.Therefore, option B is appropriate.
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A machine that cost $121,000 has an estimated residual value of $11,000 and an estimated useful life of 11,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,000 hours in year 1, 2,000 hours in year 2, and 3,000 hours in year 3. Calculate its book value at the end of year 3. (Do not round intermediate calculations.)
Answer:
Book value= $41,000
Explanation:
Giving the following information:
Purchase price= $121,000
Salvage value= $11,000
Useful life= 11,000 machine hours
First, we need to calculate the depreciation expense for each year using the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of production in hours]*hours operated
Year 1:
Annual depreciation= [(121,000 - 11,000) / 11,000]*2,000
Annual depreciation= 10*3,000
Annual depreciation= $30,000
Year 2:
Annual depreciation= 10*2,000
Annual depreciation= $20,000
Year 3:
Annual depreciation= 10*3,000
Annual depreciation= $30,000
Now, the accumulated depreciation:
Accumulated depreciation= 30,000 + 20,000 + 30,000
Accumulated depreciation= $80,000
Finally, the book value at the end of year 3:
Book value= purchase price - accumulated depreciation
Book value= 121,000 - 80,000
Book value= $41,000
Cost standards for one unit of product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 Use the information to compute the following variances. The direct-material quantity variance is:
Answer:
Usage variance=$750
Explanation:
A material usage variance occurs when the standard quantity required to active a particular level of production is higher or lower than than the actual actual quantity used. A favorable variance would mean than less quantity of materials were used than the standard to achieve a given output level. And an adverse variance would mean the opposite
Pounds
7,800 units should have used ( 7,800× 3) 23,400
but did use 23,100
Usage variance 300
× standard price $2.50
Usage variance $750 favorable
Usage variance =$750
Branford has one share of stock and one bond. The total value of the two securities is $1,200. The bond has a YTM of 10.2%, a coupon rate of 9.2%, and a face value of $1,000; pays semi-annual coupons with the next one expected in 6 months; and matures in 8 years. The stock pays annual dividends and the next dividend is expected to be $24.87 and paid in one year. The expected return for the stock is 15.2%. What is the price of the stock expected to be in 1 year?
Answer:
The price of the stock is expected to be $188.16 in 1 year.
Explanation:
This can be determined as follows:
Current price of the stock = Expected next dividend / Expected return = $24.87 / 15.2% = $163.62
Expected stock price in 1 year = Current price of the stock * (100% + Expected return)^Number of year = $163.62 * (100% + 15.2%)^1 = $188.16
Therefore, the price of the stock is expected to be $188.16 in 1 year.
Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 31 percent for the next three years, with the growth rate falling off to a constant 6.1 percent thereafter. If the required return is 12 percent and the company just paid a dividend of $2.80, what is the current share price
Answer:
$82.85
Explanation:
The Jones Company has a very limited return policy for its products, and a customer can only return an item with a store receipt. The Jones Company has established this return policy without any customer satisfaction research. While the Jones Company thinks its policy is fair, many customers do not. A service-providing firm like the Jones Company that does little or no customer satisfaction research is most likely to experience a gap between _______.
Answer:
the customers' wants and what management thinks customers want.
Explanation:
A warranty can be defined as a written promise or guarantee made by a manufacturer, lessor or seller about the identity or quality of goods and services or a property to a purchaser, promising him or her to repair or replace it if necessary within a specified time frame.
An express warranty is typically considered to be an affirmative promise about the quality or characteristics of an item that is being sold to a buyer and as such it is binding and enforceable by law.
It recognized by the Uniform Commercial Code ("UCC") as explicit, stated promises by a manufacturer.
In this scenario, The Jones Company has a very limited return policy for its products, and a customer can only return an item with a store receipt. The Jones Company has established this return policy without any customer satisfaction research. While the Jones Company thinks its policy is fair, many customers do not. A service-providing firm like the Jones Company that does little or no customer satisfaction research is most likely to experience a gap between the customers' wants and what management thinks customers want.
A quality function deployment can be defined as a measure of customer wants or requirements and developing them into processes (how) that each functional area of the manufacturing firm can understand and work with.
Explain with examples, the process of screening and evaluating new venture opportunities.
Bretts Construction Company had a contract starting April 2017, to construct a $6,000,000 building that is expected to be completed in September 2018, at an estimated cost of $5,500,000. At the end of 2017, the costs to date were $2,530,000 and the estimated total costs to complete had not changed. The progress billings during 2017 were $1,200,000 and the cash collected during 2017 was $800,000. For the year ended December 31, 2017, Bretts would recognize gross profit on the building of:
Answer: $230,000
Explanation:
Gross profit to be earned from project:
= Construction price - cost of construction
= 6,000,000 - 5,500,000
= $500,000
Percentage of costs incurred in 2017:
= 2,530,000 / 5,500,000 * 100%
= 46%
The Gross profit for 2017 is therefore:
= Percentage of cost incurred * total gross profit
= 46% * 500,000
= $230,000
Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $420,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 6% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives
Answer:
The lum-sum must equal $5,369,009.59
Explanation:
Giving the following information:
First option:
Annual payment= $420,000
Number of periods= 25 years
Interest rate= 6%
First, we need to calculate the future value of the first option using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {420,000*[(1.06^25) - 1]} / 0.06
FV= $23,043,095.04
Now, to determine the lump-sum to receive today, we need to determine the present worth of the annuity:
PV= FV / (1 + i)^n
PV= 23,043,095.04 / (1.06^25)
PV= $5,369,009.59
Shareholders in Frontier Communications were not pleased to learn that the company's market share had changed from 40 to 21 percentage points, a loss of 19 percentage points. What was the percent change in market share
Answer:
[tex]47.5\%[/tex]
Explanation:
Given: The company's market share had changed from 40 to 21 percentage points.
To find: percent change in market share
Solution:
Change in percentage of company's market share [tex]=40-21=19[/tex]
Percent change in market share = (Change in percentage of company's market share ÷ 40) × 100
[tex]=\frac{19}{40}(100)=47.5\%[/tex]
The project management plan is the output of the planning process of project _____. a. scope management b. procurement management c. integration management d. quality management
The planning for project management should be the result of the planning process of project integration management.
The information related to the project integration management is as follows:
It involved the coordination of all the parts of the projects. It is the formal document that measured how the project should be executed, controlled & checked.Therefore, the other options are incorrect.
Thus we can conclude that the planning for project management should be the result of the planning process of project integration management.
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distribution strategies
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Matlock Company uses a periodic inventory system. Its beginning inventory consists of 50 units that cost $ 34 each. On June 3, the company purchased 150 units at $ 34 each. On June 15, the company sold 125 units at $ 50 each. Thecompany closes the books on June 30. The physical counts indicate that 75 units are available in the warehouse on June 30. Journalize the June transactions.
Answer:
Matlock Company
Journal Entries:
June 3: Debit Inventory $5,100
Credit Cash $5,100
To record the purchase of inventory.
June 15: Debit Cash $6,250
Credit Sales revenue $6,250
To record the sale of goods.
June 15: Debit Cost of goods sold $4,250
Credit Inventory $4,250
To record the cost of goods sold.
Explanation:
a) Data and Analysis:
June 3: Inventory $5,100 Cash $5,100
June 15: Cash $6,250 Sales revenue $6,250
June 15: Cost of goods sold $4,250 Inventory $4,250
Joe King has an annual income of $240,000. Joe is buying a $400,000 house in a very desirable area, sought after by buyers. He applies for a loan at the bank and is approved for fully amortizing 30-year FRM at an annual rate of 3.40%, with monthly payments, compounded monthly. The bank will not lend more than 80% LTV. The appraisal indicates the house is worth $375,000. Assuming he does not want PMI What is the biggest mortgage Joe can get
Answer:
Joe King
The biggest mortgage Joe can get $300,000 (80% of $375,000).
Explanation:
a) Data and Calculations:
Joe King's annual income = $240,000
Cost of purchasing a house = $400,000
Bank highest limit = 80% LTV
Appraised worth of house = $375,000
80% of $375,000 = $300,000
b) 80% LTV means 80% of the loan to the property value (LTV). It is essentially the size of the mortgage that the bank is prepared to offer Joe in relation to the value of the property he is purchasing. In this instance, the appraised value of the property is $375,000. The 80% LTV will be equal to $300,000 ($375,000 * 80%).
Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return
Answer: capital loss of $200000
Explanation:
To solve the question goes thus:
Value of shares that was received from Jupiter = 300000 × $2 = $600,000
Cash received = $100,000
Total gotten = $700,000
We then deduct the value of stock that was foregone by Mars. This will be:
= $700,000 - $900,000
= - $200,000
Therefore, a capital loss of $200,000 would be disclosed in the Income tax return.
Drag each label to the correct location on the image.
Identify the features of stocks and bonds.
There are various types of investments. The most common type of investments are Bonds and Stocks.
What is difference between Bond and Stock?A bond is an investment which is considered as less risky because it provides fixed coupon rate as return.
A Stock is considered as risky investment because its returns vary.
The features of Bond are : It has Coupon rate, Face value and Maturity date
The features of Stock are : It has Closing Price
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Answer:
stock- closing price; bond- coupon rate, face value, maturity date
Explanation:
Which of the following statements regarding employer reporting of pension trust funds is not correct? Group of answer choices Contributions by the governmental funds are recorded as expenditures in the General Fund. The net pension liabilities of proprietary fund employees are reported in the proprietary fund-basis statements. The net pension liability is reported in the government-wide financial statements. The net pension liability is reported in the governmental fund financial statements. Re-watch Continue Play 17:49 19:44 Question 1, Answered Question 2, Answered Question 3, Answered Question 4, Unanswered Question 5, Unanswered Volume Playback Speed 1x 1x Media Quality Full Screen Playback Speed Play Volume Media Quality Full Screen Details Quiz Results
Answer: The net pension liability is reported in the governmental fund financial statements
Explanation:
A pension trust fund is a long term savings plan that is being contributed to by the employer and the employee and it's a form of job benefit.
A pension plan is used to help workers build their retirement income and then withdraw as annuity payments. The option that the net pension liability is reported in the governmental fund financial statements isn't correct.
Blue Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $37,000 at the beginning of each year, and Blue's incremental borrowing rate is 5%, which is the same as the lessor's implicit rate Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $232,000.
Answer:
this is an operating lease, so you do not have to calculate present value, all you need to calculate is depreciation expense:
January 1, 2020
Dr Cash 37,000
Cr Unearned revenue 37,000
December 31, 2020
Dr Unearned revenue 37,000
Cr Lease revenue 37,000
December 31, 2020
Dr Depreciation expense 29,000
Cr Accumulated depreciation, equipment 29,000
$232,000 / 8 years = $29,000
This picture of gas stations BEST illustrates which aspect of a market economy?
A
credit
B
competition
с
interest rates
D
opportunity cost
Answer:
B. Competition is the answer for E2020
Explanation:
As a project engineer, you received the AW analysis below from the finance department. It is for a new piece of equipment you ordered some months ago. You were told the interest rate used was 10% per year, but no first cost or projected salvage value was provided and you want to know them. Determine the values of P and S using the AW values for the year 3. Note: The AW values are equivalent values through the given year, not costs for the single year.
Answer and Explanation:
The computation of the value of P and the value of S is shown below:
For P
The Annual worth of the first cost for the year 3 is $18,899
Now
Annual worth = First Cost(A/P, 10%, 3)
$18,899 = P[0.1(1 + 0.1)^3 ÷ ((1 + 0.1)^3 - 1)]
$18,899 = 0.4021P
P = $46,999
For S
The Annual worth of the salvage value for the year 3 is $6,648
Now
Annual worth = Salvage value(A/F, 10%, 3)
$6,648 = S[0.1 ÷ ((1 + 0.1)^3 – 1)]
$6,648 = 0.30211S
S = $22,005
Suppose you are a euro-based investor who just sold shares of a U.S. company that you had bought six months ago. You had invested 10,000 euros to buy theshares for $120 per share; the exchange rate was $1.03 per euro. You sold the stock for $171 per share and converted the dollar proceeds into euro at the exchange rate of $0.94 per euro.
Required:
Compute the rate of return on your investment in euro terms.
Answer:
The rate of return on your investment in euro terms is 56.14%.
Explanation:
Amount invested in euros = 10,000 euros
Amount invested in dollars = Amount invested in euros * Exchange rate at the time of purchase = 10,000 euros * $1.03 = $10,300
Number of shares bought = Amount invested in dollars / Cost price per share in dollars = $10,300 / $120 = 85.8333333333333
Proceeds from sales in dollars = Number of shares bought * Selling price per share in dollars = 85.8333333333333 * $171 = $14,677.50
Proceeds from sales in euros = Proceeds from sales in dollars / Exchange rate at the time of sales = $14,677.50 / $0.94 = 15,614.36 euros
Rate of return in euro terms = (Proceeds from sales in euros - Amount invested in euros) / Amount invested in euros = (15,614.36 - 10,000) / 10,000 = 0.5614, or 56.14%
Therefore, the rate of return on your investment in euro terms is 56.14%.
The welding department supplies parts to the final assembly line. Management decides to implement a kanban system and has collected the following data: The daily demand is 2500 units. The production lead time is 3 days (this includes processing time, transport time, and waiting time). Management has decided to have 1.5 days of safety stock. One container fits 250 units.How many kanban containers will be needed to support this system?
Answer: 45 containers
Explanation:
The number of containers needed is calculated by:
= (Expected demand during Lead time + Safety Stock) / Container Capacity
Expected demand during Lead time = Daily demand * Lead time
= 2,500 * 3
= 7,500 units
Safety stock = 1.5 days * 2,500
= 3,750 units
Number of containers needed:
= (7,500 + 3,750) / 250
= 45 containers
hich of the statements is TRUE? Patents give inventors exclusive rights to sell a product for an unlimited period of time. Copyrights are legal protections that protect a product from being copied by others for an unlimited period of time. Copyrights give inventors exclusive rights to sell a product for a specific period of time. Patents are legal protections that protect a product from being copied by others for a specific period of time. Copyrights give inventors exclusive rights to sell a product for an unlimited period of time. Patents are legal protections that protect a product from being copied by others for an unlimited period of time. Patents give inventors exclusive rights to sell a product for a specific period of time. Copyrights are legal protections that protect a product from being copied by others for an unlimited period of time. Patents give inventors exclusive rights to sell a product for a
Answer:
Patents allow inventors to exclusively sell a product for a specific period of time. Copyrights are legal protections that protect a product from being copied by others for a specific period of time
Explanation:
Patents are a right granted to an inventor to exclusively sell a product for a specific period of time usually for 20 years. During this period, others are prevented from making, using, or selling the invention.
Types of patents include :
utility patents design patents plant patentCopyright gives the inventor of a product and anyone they give the permission to the right to reproduce the product.
gooQS 8-1 Cost of plant assets LO C1 Kegler Bowling buys scorekeeping equipment with an invoice cost of $160,000. The electrical work required for the installation costs $16,800. Additional costs are $3,360 for delivery and $11,530 for sales tax. During the installation, the equipment was damaged and the cost of repair was $1,550. What is the total recorded cost of the scorekeeping equipment
Answer:
$180,160
Explanation:
Calculation of Cost of scorekeeping equipment
Purchase Price $160,000
Installation Cost $16,800
Delivery Cost $3,360
Total Cost $180,160
Note Sales Tax and Costs incurred subsequently after asset is put to use is excluded from Cost of Asset.
Therefore,
the total recorded cost of the scorekeeping equipment is $180,160.
Petty Cash Journal Entries
1. Based on the following petty cash information, prepare (a) the journal entry to establish a petty cash fund, and (b) the journal entry to replenish the petty cash fund. If an amount box does not require an entry, leave it blank. When required, enter amounts in dollars and cents.
On January 1, 20--, a check was written in the amount of $200 to establish a petty cash fund. During January, the following vouchers were written for cash removed from the petty cash drawer:
Voucher No. Account Debited Amount
1 Phone Expense $17.50
2 Automobile Expense 33.00
3 Joseph Levine, Drawing 56.00
4 Postage Expense 12.50
5 Charitable Contributions Expense 15.00
6 Miscellaneous Expense 49.00
Answer:
(a) January 1
Dr Petty cash $200
Cr Cash $200
B. January
Dr Phone Expense $17.50
Dr Automobile Expense 33
Dr Joseph Levine, Drawing 56
Dr Postage Expense 12.50
Dr Charitable Contributions Expense 15
Dr Miscellaneous Expense 49
Cr Petty cash 183
January 31
Dr Petty cash $183
Cr Cash $183
Explanation:
(a) Preparation of the journal entry to establish a petty cash fund
January 1
Dr Petty cash $200
Cr Cash $200
b. Preparation of the journal entry to replenish the petty cash fund.
January
Dr Phone Expense $17.50
Dr Automobile Expense 33
Dr Joseph Levine, Drawing 56
Dr Postage Expense 12.50
Dr Charitable Contributions Expense 15
Dr Miscellaneous Expense 49
Cr Petty cash 183
($17.50+33+56+12.50+15+49)
January 31
Dr Petty cash $183
Cr Cash $183
($17.50+33+56+12.50+15+49)
Members of 67 countries attended a conference on economic development hosted by an international organization based in Gent, Belgium. Attendees of the workshop learned about techniques designed to assist countries in expanding their degree of economic development. Emerging markets act as manufacturing bases for global Miltinationals Enterprises because of ________.
Answer:
High availability.of cheaper labour
Explanation:
An emerging market is defined as one that does not meet the standards of a fully developed market. For example in the area.of labour cost there is no standard set for it.
So companies can get cheap labour from these economies.
Companies like Apple and Nike have used cheap labour from emerging countries to reduce their cost of production.
Manufacturing bases are established in relatively poorer economies where the workers are willing to work for cheap wage
At the beginning of 2017, Miyazaki Company's Accounts Receivable balance was $105,000, and the balance in Allowance for Doubtful Accounts was $1,950. Miyazaki's sales in 2017 were $787,500, 80% of which were on credit. Collections on account during the year were $502,500. The company wrote off $3,000 of uncollectible accounts during the year.
Required
a. Identify and analyze the transactions related to the sales, collections, and write-offs of accounts receivable during 2017.
b. Identify and analyze the adjustments to recognize bad debts assuming that (a) bad debts expense is 3% of credit sales and (b) amounts expected to be uncollectible are 6% of the yearend accounts receivable.
c. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2)?
d. What effect does the recognition of bad debts expense have on the net realizable value? What effect does the write-off of accounts have on the net realizable value?
Answer:
Miyazaki Company
a. Analysis of transactions:
Sales in 2017 = $787,500
Credit Sales = $630,000 (80% of $787,500)
Total collections on account = $502,500
Uncollectibles written off = $3,000
Unpaid balance for the year = $229,500 ($105,000 + $124,500)
b. a) Bad Debt Expense = $18,900
b) Bad Debt Expense = $14,820
c. Net Realizable Value of Accounts Receivable on December 31:
a) b)
Unpaid balance for the year $229,500 $229,500
Allowance for doubtful accounts (18,900) (14,820)
Net Realizable Value = $210,600 $214,680
d. The recognition of bad debts expense does not have any direct effect on the net realizable value. It is the Allowance for doubtful accounts that has a negative effect on the net realizable value.
The write-off of accounts reduces the net realizable value by $3,000.
Explanation:
a) Data and Calculations:
Beginning balances:
Accounts receivable = $105,000
Allowance for Doubtful Accounts = $1,950
Sales in 2017 = $787,500
Credit Sales = $630,000 (80% of $787,500)
Total collections on account = $502,500
Uncollectibles written off = $3,000
Unpaid balance for the year = $229,500 ($105,000 + $124,500)
Bad Debts Expense = $18,900 ($630,000 * 3%)
Allowance for Uncollectibles = $13,770 ($229,500 * 6%)
a) Allowance for Doubtful Accounts:
Account Titles Debit Credit
Beginning balance $1,950
Accounts receivable $3,000
Bad Debts Expense 18,900
Balance 17,850
b) Allowance for Doubtful Accounts:
Account Titles Debit Credit
Beginning balance $1,950
Accounts receivable $3,000
Bad Debts Expense 14,820
Balance 13,770
Albert and his family sell beverages outside the stadium during local football matches. Local football matches take place every day because they are the main form of entertainment in the town. Albert knows that demand for beverages will depend on whom the local team is playing against. Albert has a large amount of beverages stored at home, and whatever does not get sold one day, will be stored for the next day. Based on the expected demand, Albert determines how many coolers will be needed for that day and rents the appropriate number of coolers from a local supplier (the only local supplier of coolers in town). The local supplier of coolers is an avid football fan and therefore opens the store only for a few hours early in the morning before the game. Once Albert has rented the coolers, the store closes until the next day. Which of the following statements are correct about Albert's business?A. For Georgina's business, the number of beverages is always a variable factor and the number of coolers is always a fixed factor. B. Before deciding how many coolers to rent, as long as the supply store is still open, Georgina is facing a long- run decision. C. Once Georgina has rented the coolers and the supplier has closed the store, Georgina is facing a long-run decision. D. Specifically for this problem, the long run could be described as roughly 24 hours. E. The long run is never less than 1 year.
Answer:
The correct statements about Albert's business:
C. Once Georgina has rented the coolers and the supplier has closed the store, Georgina is facing a long-run decision.
D. Specifically for this problem, the long run could be described as roughly 24 hours.
Explanation:
From the scenario, the variable factors are the number of beverages and the number of coolers for Albert's business. This is because the number of beverages and the number of coolers depend on demand. This eliminates option A. Option B is not a long-run decision but a short-run one. The long-run is a time period when the decision-maker cannot change her decisions to meet the prevailing demands.
Fenway Electronics produces video games in three market categories: commercial, home, and miniature. Fenway has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:
Total Pooled
Category Cost Types of Costs Cost Driver
Unit $360,000 Indirect labor wages, supplies, factory utilities,
machine maintenance Machine hours
Batch 194,400 Materials handling, inventory storage, labor for
setups,packaging, labeling and shipping, Number of
scheduling production
orders
Product 105,600 Research and development Time spent
by research
department
Facility 300,000 Rent, general utilities, maintenance, facility
depreciation, admin. salaries Square
footage
Additional data for each of the product lines follow:
Commercial Home Miniature Total
Direct materials cost $25.00 /unit $15.00 /unit $12.00 /unit —
Direct labor cost $10.00 /hour $8.00 /hour $9.00 /hour —
Number of labor hours 6,000 12,000 2,000 20,000
Number of machine
hours 10,000 45,000 25,000 80,000
Number of production
orders 200 2,000 800 3,000
Research and
development time 10% 20% 70% 100%
Number of units 15,000 45,000 14,000 74,000
Square footage 20,000 50,000 30,000 100,000
Required:
1. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.
3. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.