Let us see it from a cost-efficiency point of view. We have that every unit of the first selles costs 40$. But the total cost might be higher, since there is a chance for defect. On average, on 3% of the cases the defect will happen and it will cost him 500$. Hence, on average, a fence unit from producer a costs 40$ and has a repair cost of 3%*500$=15$. The total thus is 55$. For the second provider of fences, the standard cost is 50$. Similarly, the average repair cost is 0,5%*500$=2,5$. Hence, the total cost per unit is 52,5$ (total cost=upfront payment+repair costs). We see thus that the lady should win the bid; even if you pay more upfront, the difference in durability makes up the cost difference.
Answer:
a. If two similar properties are for sale, a buyer will purchase the cheaper of the two.
Explanation:
The principle of substitution justifies the idea that the maximum value of a property will be set by the selling price of an equally valuable and desirable substitute property. In this case of property sale, if an area has two similar houses and one is being sold for $912,000 and the other is priced at $105,000, buyers will most likely go for the cheaper one. There is no reason to pay more money if they will be getting a similar property at low cost.
Answer: $300,000
Explanation:
As overhead is applied on the basis of direct labor cost, the overhead rate for the period is:
= Overhead / Direct labor cost * 100%
= 5,340,000 / 890,000 * 100%
= 600%
If direct labor cost is $50,000 then overhead applied will be:
= Direct labor cost * Overhead rate
= 50,000 * 600%
= $300,000
Answer:
Operating loss will decrease by $20,000
Explanation:
Operating loss from normal business activities and if the division is not shut down = $150,000.
Operating loss if division is shut down by the management = $130,000 ($480,000 - $350,000) because the management has determined that $350,000 of the $480,000 Fixed Costs shown would be eliminated if that happens.
So, if the Northern Division is shutdown, the Operating loss will decrease by $20,000 (From $150,000 to $130,000)
