Answer:
Favorable for price and unfavorable for usage.
Explanation:
Provided Information,
Standard Material = 2.2 pounds per unit
Standard cost = $2 per pound
Actual Quantity = 2.3 pounds per unit
Actual cost = $1.95 per pound
In Material Price variance we have = (Standard Price - Actual Price) Actual Quantity
Since Standard Price $2 is more than actual price = $1.95 the variance is favorable.
In material quantity variance we have = (Standard Quantity - Actual Quantity) Standard Rate
Since actual quantity used = 2.3 pounds is more than standard 2.2 pounds the variance will be unfavorable
Therefore, Price Variance = Favorable, and Quantity Variance = Unfavorable.
Answer:
a. Menu cost.
b. Nominal wage of confusion.
c. Real shock.
d. Solow Growth Rate
e. Business Fluctuations.
Explanation:
a. Menu cost: Firms' costs associated with changing their prices.
b. Nominal wage of confusion: When workers respond, not to the purchasing power of their wage, but to the face value of their wage or salary.
c. Real shock: An event that changes the existing productivity and therefore changes the extent to which economic growth occurs.
d. Solow Growth Rate: Given flexible prices and the existing factors of production, a measure of how much the economy grows.
The Solow Growth Model, developed by Robert Solow, a Nobel Prize winning economist. It was the first neoclassical growth model which was was built upon the Keynesian Harrod-Domar model. The modern theory of economic growth is given by the Solow Model.
The equation below gives us the change in capital stock per worker with population growth at rate n;
Δk = sf(k) – (δ + n)k.
Where k: capital stock per worker in period t
s: savings rate
δ: rate of depreciation of capital
n: labor or number of workers
sf(k): savings per capita multiplied by a fraction of income saved.
e. Business Fluctuations: Variations in the growth rate from the long-run rate of economic growth real shock business fluctuations.
<u>Solution and Explanation:</u>
<u>Annual savings in cost: </u>
Savings in Labour and OH cost (8500 units at 2.20) 18700
Add: Savings in fixed cost 4400
Less: Increase in material cost (8500 units at 0.25) 2125
Net annual savings in cost 20975
Present annuity factor for 6 years at 5% 5.0757
Present value of Annual savings in cost 106462.8
Add: Present value of Salvage value of new equipment 22386
($ 30,000 with PVF at 0.7462)
Add: Salvage value of existing machine 30,000
Total Present value of cash inflows 158,849
Less: Initial investment 145,000
Net present value 13,849
Answer:
see below
Explanation:
Fixed costs have been described as the costs of staying in business. They are business expenses that remain constant in a financial period. A business must incur fixed costs regardless of its level of output. In other words, fixed costs are not influenced by business output.
Although fixed costs will remain constant in a financial period, or in the short run, they are bound to change in the long run. Examples of fixed costs include rent, insurance, depreciation, and administrative salaries.
Answer:
Return on investment ≈ 29%
Explanation:
<em><u>using excel function </u></em>
Determine :
Rate = 7% / 12 = 0.0058
Nper value = 30 years * 12 = 360
PV = -$150,000
∴ PMT value = $997.95
next : calculate the outstanding balance 15 years later
= ( 997.95 / 0.00583 ) * ( 1 - ( 1 / ( 1 + 0.00583 )^15*12 ))
= 171174.96 * 0.6489
= $ 111,075.43
<u>Considering the opportunity to refinance </u>
Rate = 6% /12 = 0.005
Nper = 15 * 12 = 180
Pv = - $111,075.43
∴ PMT = 937.32
the monthly saved up payment = PMT 1 - PMT 2
= 997.95 - 937.32 = $60.63
Finally
Rate of return on investment
= 2500 = 60.63 *
hence Rate of return ≈ 29 %
attached below is a screenshot of the excel function used for question 2 and it can be used for question 1 as well just change the values