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artcher [175]
2 years ago
13

Explain how the accounting for a fair value hedge differs for the hedged item and for the hedging item compared to the accountin

g for a cash flow hedg
Business
1 answer:
igomit [66]2 years ago
4 0

A cash flow hedge is accounted for differently than a fair value hedge.

<h3>What is a Fair Value Hedge?</h3>

Fair price hedges may be used to mitigate the danger of modifications withinside the truthful marketplace price of liabilities, belongings, or different company commitments. Generally, truthful price hedges pass withinside the contrary route of the hedged object so they may be used to cancel out your losses. As a result, derivatives like alternatives and futures are fantastic examples of truthful price hedges.

<h3>What is a Cash Flow Hedge?</h3>

Cash go with the drift hedges can assist to mitigate the dangers which are related to surprising modifications in coins flows of belongings or liabilities, instead of the asset or legal responsibility itself. There are many various factors that could result in those kinds of modifications, inclusive of increases/decreases in forex rates, modifications in hobby rates, modifications in asset prices, and so on.

<h3>What’s the distinction among Cash Flow Hedge and Fair Value Hedge?</h3>

As you could see, the important thing distinction among a coins go with the drift hedge and a truthful price hedge is the hedged object. With a coins go with the drift hedge, you’re hedging the modifications in coins influx and outflow from belongings and liabilities, while truthful price hedges assist to mitigate your publicity to modifications withinside the price of belongings or liabilities. So, at the same time as truthful price hedges are first-rate acceptable to constant price items, the blessings of coins go with the drift hedges lead them to perfect for variable price items.

Learn more about Hedging on:

brainly.com/question/22282124

#SPJ4

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The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed mar
Cerrena [4.2K]

Answer:

The correct answer is $100,000.

Explanation:

Following is the information provided:

Sales @$10 per unit                                  $4,000,000

Cost of goods @$8 per unit                    ($3,200,000)

Operating cost @$0.75 per unit             <u>  ($300,000)  </u>

Profit for the year                                     <u>   $500,000  </u>

Now the company has to calculate variable costs that are relevant here. The variable cost included in cost of goods sold is:

Variable costs per unit = (Cost of goods sold - Fixed Costs included in Cost of goods) / Units Sold

The units sold can be calculated by dividing Sales with selling price per unit. Which is:

Number of units sold = $4,000,000 / $10 per unit = 400,000 Units

Now putting values in the above equation, we have:

Variable costs = ($3,200,000 - $1,200,000) / 400,000  = $5 per unit

Other variable operating costs per unit will also be calculated as it is also a variable cost here. Because the variable operating cost per unit is relevant here for decision making, it would be calculated as under:

Variable operating cost per unit = (Operating Cost - Fixed cost included) / Number of units sold

By putting values, we have:

Variable operating cost per unit = ($300,000 - $100,000) / 400,000 units

= $0.5 per unit

Now we will calculate Net benefits arising from this order. The relevant costs are variable costs and relevant revenues are at the rate $7.5 per unit.

Cost - Benefit analysis:

Savings from sales = 50,000 units * $7.5 per unit =                     $375,000

Variable cost = 50,000 units * $5 per unit =                                 ($250,000)

Variable operating cost per unit = 50,000 units * $0.5 per unit=<u> (</u><u>$25,000)</u>

Net Saving / (Loss)                                                                           $100,000

So the net gain from this opportunity will be $100,000.

4 0
3 years ago
The frictional unemployment rate is 2.5 percent, the structural unemployment rate is 3.1 percent, and the economy's current unem
sattari [20]

Sounds like Obamacare MAGA

8 0
3 years ago
Suppose there is a 10% rise in the price of gasoline. then, according to the law of –, we expect the quantity of gasoline suppli
KATRIN_1 [288]
Law of supply and demand, increase, down, decrease
6 0
3 years ago
If a good is inferior, then an increase in income will result in a(n) a. increase in the demand for the good. b. decrease in the
Paul [167]

Answer:

b. decrease in the demand for the good. 

Explanation:

An inferior good is a good whose demand falls when income increases and rises when income decreases.

A decrease in demand would lead to a leftward shift of the demand curve.

Inferior goods contrasts to a normal good. A normal good is a good whose demand increases when income rises and falls when income reduces.

Only a change in the price of a good leads to movement along the demand curve for that good.

I hope my answer helps you

7 0
3 years ago
The district director of 5 mortgage origination offices staffed by bank associates who cold call potential customers in an attem
Artist 52 [7]

Answer:

Revenue Centre

Explanation:

Revenue Centre is that division or department of the firm which generate or create revenue through sale of the goods and the services. The district director who is managing the 5 mortgage origination offices that is staffed by the bank associates. So, most likely responsible for a revenue centre of the business. And who works for revenue centre is only responsible or accountable for the revenue only.

4 0
3 years ago
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