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3 years ago

All of the following are disadvantages of using the average rate of return except:____________.

Business

1 answer:

ad-work [718]3 years ago

5 0

Answer:

c. the average rate of return method includes the entire amount of income earned over the life of the proposal.

Explanation:

the average rate of return is a capital budgeting method.

Average rate of return = Average net income / Average book value

Average book value = (cost of equipment - salvage value) / 2

From the above formula, it can be seen that the entire income earned over the life of the project is used when calculating average rate of return.

the average rate of return method does not consider the timing of the expected cash flows. or use present values unlike the net present value and internal rate of return.

Net income is used instead of expected cash flows when calculating ARR

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Answer:

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Explanation:

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2 years ago

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Dilts Company has a unit selling price of $630, variable costs per unit of $380, and fixed costs of $335,000. Compute the break-

Rudik [331]

Answer:

Q= TFC/(SP-VC)

Break Even Point in Units = 1116.67 ≅1117

Explanation:

Dilts Company

Sales price $630,

Variable costs per unit $380,

Contribution Margin 300

Fixed costs $335,000

The Mathematical Equation

Q= No of units

Total Revenue= TR

Total Cost = TC

Total Fixed Costs= TFC

Variable Costs= VC

Sales Price = SP

Total Revenue= TR= Price Per unit * No Of units = SP * Q

Total Cost = TC = Total Fixed Costs + Variable Costs ( Number of Units)=

TC= TFC + VC*Q

Now according to break even the total revenue must equal the the total costs

TR= TC

SP*Q= TFC + VC*Q

On re arranging the above equation

SP*Q- VC*Q= TFC

Q(SP-VC)= TFC

Q= TFC/(SP-VC)

Number of Units=Total Fixed Costs/Sales Price- Variable Costs

b) Break Even Point in units = Fixed Costs/ Contribution Margin per unit

Break Even Point in units = Fixed Costs/ (Sales- Variable cost)

Break Even Point in Units = $335,000/ 300= 1116.67 ≅1117

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3 years ago

On December 31, Rivera Company receives a utility bill in the mail for $440. Rivera Company intends to pay the bill in early Jan

olga55 [171]

Answer:

(a)overstated

(b)overstated

(c)no effect

Explanation:

(a) As there is an expense account (utilities expense) which, is not included in the income statement, result for the year will be higher than if was.

(b)The revenues account will be oaky. But, the total expenses will be lower, as there are cost of the period which are not included.

So the Net incoem will be higher than a correct income as their expenses do not include this utilities expense

(c) The balance sheet will have no effect in the total Asset or Total Liaiblities+SE but, it is a change in the composition.

The income (reained earnings) should be lower as the income will be lower and a liability will be create (utilities payable) to fill this so:

with the mistake:

liab 0 equity (+400)

ammending the mistake

liab 400 equity 0

the net effect is zero.

It will decrease equity and increase liability, but the su of both will be the same

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3 years ago